Sales at U.S. retailers dropped in July for the first time in five months as record gasoline prices and tighter credit reduced automobile purchases.
Spending dropped 0.1 percent from June, the Commerce Department said. Excluding cars, sales rose 0.4 percent, less than anticipated.
Consumer spending, which makes up more than two-thirds of the economy, is likely to keep fading as a boost from tax rebates wanes and households try to cope with job losses and house-price declines. Macy’s Inc., the No. 2 U.S. department-store chain, yesterday said its profits may fall more than it forecast. Wal-Mart Stores Inc., Kohl’s Corp. and J.C. Penney Co. also report earnings this week.
“With the tax-rebate effects dissipating and the labor market weakening, we should see consumer spending slow through the remainder of the year,” said Dana Saporta, an economist at Dresdner Kleinwort in New York.
Separately, the Labor Department said prices of imported goods soared 21.6 percent in the year to July, the most since at least 1982. Import prices rose 1.7 percent in July from the previous month, more than economists had projected, after a 2.9 percent increase in June.
“We are in the midst of a long-term trend in inflation,” said Joe Brusuelas, chief economist at Merk Investments LLC in Palo Alto, Calif. “We can’t sugarcoat this. It’s not a good thing.”
Stocks and Treasuries dropped on yesterday’s news. Benchmark 10-year notes yielded 3.94 percent in the afternoon, compared with 3.90 late on Tuesday. The Standard & Poor’s 500 Stock Index fell 0.3 percent to close at 1,286.
July’s retail sales excluding gasoline decreased 0.2 percent, the Commerce Department said. The drop in total purchases matched the median estimate of 75 economists in Bloomberg’s survey. Sales in June rose a revised 0.3 percent, compared with the previous estimate of 0.1 percent.
“A whole host of factors — unemployment growing, wages flat to stagnating, the wealth effect of lower house prices and stock prices — all are conspiring to forecast, I think, weaker sales ahead,” Thomas Duesterberg, chief executive officer of the Manufacturers Alliance, said in a Bloomberg Television interview.
Yesterday’s report indicated Americans spent the cash from tax rebates on more than just gasoline. Sales at furniture stores rose 1 percent, the most since January 2007, and climbed 0.8 percent at electronics outlets. Purchases at general merchandise retailers increased 0.3 percent.
Wal-Mart last week said same-store sales will probably slow this month after rising 3 percent in July because most shoppers have already received their tax rebates.
Customers bought groceries, flat-panel televisions and video games, while apparel and home goods were “slightly negative,” Wal-Mart said. Consumers are spending “more cautiously” as stimulus checks end, Eduardo Castro-Wright, the retailer’s head of U.S. stores, said in a statement.
More than 90 percent of the estimated $100 billion in rebate checks forecast to go out this year had been sent as of mid-July, Treasury Department figures show. Spending, which has grown every quarter since 1992, may stall in the last three months of this year after growing at a 0.6 percent annualized pace from July to September, according to a monthly Bloomberg survey of economists.