Retail sales drop for first time in 5 months
WASHINGTON -- Retail sales fell in July, the weakest performance in five months, as a variety of economic woes combined to blunt the impact of billions of dollars in government stimulus payments to U.S. households.
The Commerce Department reported Wednesday that retail sales dipped 0.1 percent last month, the first decline since sales had fallen by 0.5 percent in February. It was a worse showing than the flat reading economists had been expecting.
The weakness last month came after another big slide in auto sales as Detroit faced its worst sales month in 16 years. Automakers have been battered by the weak economy and record gasoline prices which have cut into demand for their once-popular sport utility vehicles and pickup trucks.
Excluding the big drop in autos, retail sales would have posted a 0.4 percent increase. While that was a positive reading, it was still the weakest showing for sales excluding autos in five months.
Much of what little strength there was in July came from a big jump in sales at gasoline stations, which were up 0.8 percent. That increase reflected surging prices rather than increased demand, however.
Gasoline pump prices hit an all-time high during the month at $4.11 per gallon. Without the big rise in gasoline station sales, retail sales would have fallen by 0.2 percent in July.
The disappointing performance of retail sales meant that the consumer sector, which accounts for two-thirds of total economic activity, got off to a weak start at the beginning of the third quarter. The government wrapped up distributing the bulk of the economic stimulus payments for a total of $92 billion through the end of July.
The Bush administration and Congress rushed a $168 billion package of stimulus payments to households and tax breaks for businesses through Congress at the beginning of this year. They were hoping to keep the worst slump in housing in decades and a severe credit crunch from pushing the country into a deep recession.
The stimulus payments, which the government started distributing in late April, have had only a limited impact on consumer spending. Their benefits have been blunted by a surge in gasoline prices that was occurring at the same time.
Studies have shown that so far about only 20 percent of the stimulus checks have been spent with consumers choosing to save much of the rest of the payments. The administration argues that the checks will get spent in coming months, helping to lift economic activity for the rest of the year.
