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Retail sales drop part of larger trend
July 17, 2012 – June's surprising retail sales decline, the third consecutive, is "a clear sign that the recent weakness in the economy is not a passing phenomenon," NAFCU Chief Economist David Carrier said Monday.
The U.S. Census Bureau reported that total retail sales fell 0.5 percent in June, weaker than expected. The most disturbing aspect of June's numbers, according to Carrier, is that it points to a larger trend. "It marks the first time retail sales have declined for three consecutive months since fall 2008," he noted. "And back then we were at the peak of the financial crisis."
Most retail segments reported declines in June, with the largest contractions at gas stations (-1.8 percent), building supply stores (-1.6 percent) and sporting goods and hobby stores (-1.6 percent). Of the few segments that did report increases, nonstore retailers had the strongest gain (0.5 percent).
Total retail sales excluding light vehicles fell 0.4 percent in June, and core retail sales, which exclude light vehicles and gas stations, fell 0.2 percent.
Year-over-year retail sales growth fell from 5.1 percent to 3.8 percent in June, the slowest year-over-year growth since August 2010. Year-over-year retail sales excluding motor vehicles rose 3 percent, while core retail sales increased 3.5 percent from a year ago.
Carrier noted that the downward retail sales trend will cause "a major dent to GDP growth in the second quarter" since consumer spending makes up 70 percent of economic activity.
NAFCU expects retail sales may pick up modestly in the second half of the year, but risks remain weighted to the downside.
For more, view NAFCU's Macro Data Flash (login required).
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