Retail Sales Rise 0.6 Percent in June

By Ylan Q. Mui
Washington Post Staff Writer
Tuesday, July 14, 2009; 12:40 PM

Higher gas prices helped boost June retail sales a better-than-expected 0.6 percent compared with the previous month, according to government data released this morning, but economists worried the price at the pump would dampen consumers' discretionary spending in the long run.

Sales at gasoline stations rose 5 percent in June compared with the previous month, the biggest increase of any category. The price of gas went from $2.50 a gallon to nearly $2.64 in June before moderating at the end of the month.

"That's actually a bad thing," said Paul Ashworth, senior U.S. economist for Capital Economics Daily. "It's not like consumers are getting any more for their money. It's just costing them more to fill up their vehicle."

Retail sales are vital to the nation's economic health, because consumer spending accounts for roughly 70 percent of the gross domestic product. June marked the second consecutive month of growth, but sales remain 9 percent below the same month last year.

Auto sales had the second-biggest increase at 2.3 percent, which Ashworth characterized as a "classic dead cat bounce." Electronics and appliance stores also made gains last month, up 0.9 percent, after struggling to persuade shoppers to buy such big-ticket items as flat-panel TVs. Sporting goods stores also rose 0.9 percent, while supermarkets inched up 0.2 percent. But department stores continued to struggle, with sales dropping 1.3 percent, the largest decline of any category.

"Today's report suggests that real consumer spending continues to stabilize, but is not yet on a firm recovery path," said Patrick Newport, U.S. economist for IHS Global Insight.

Discounting the impact of autos, gas and restaurants, retail sales actually declined 0.2 percent in June from the previous month, according to an analysis by the National Retail Federation, a trade group. NRF chief economist Rosalind Wells said consumers continue to be constrained by the rising unemployment rate and uncertainty about the prospects of recovery.

"Although several economic indicators are starting to show signs of improvement, it is going to take a few more months -- maybe longer -- for people to feel comfortable spending again," she said.

Industry experts said retailers must remain on guard. According to an analysis by Goldman Sachs and the International Council of Shopping Centers, a trade group, sales at the country's biggest chain stores fell 0.9 percent last week compared with the previous week. Cooler weather and sparse inventory dragged down the results.

"Mother Nature was not kind to retailers over the last week," said Michael P. Niemira, ICSC chief economist. "July will likely be another tough month."

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