As American consumers cut back their spending amid a persistent housing slump and higher gasoline cost, U.S. retail sales fell in June according to the Commerce Department. Sales declined 0.9%, defying most Wall Street analysts' forecasts that sales would remain unchanged.
Stripping out vehicle sales from the June report, retail sales dropped 0.4%.
The decline in retail sales is likely to disappoint the Federal Reserve which is banking on improved economic growth after U.S. growth slowed to 0.7% in the first three months of the year. Wall Street analysts track retail sales closely because consumer spending accounts for some two-thirds of all economic growth. A sustained decline in retail sales and consumer activity could dent growth going forward. The Fed has kept its key short-term fed funds interest rate anchored at 5.25% for a year as it focused on warding off inflationary pressures.
The latest retail sales snapshot also revealed that auto dealerships across the country saw their sales decline 3% in June after sales rose 1% in May. Service station sales fell 1.1% last month, amid strong spikes in gasoline costs, after rising 4.1% in the prior month.
Over the past 12 months, overall retail sales to June are up 3.8% or 4.2% excluding the auto sector.
Copyright Agence France-Presse, 2007