Slow retail sales point to weaker economy

A shopper is seen through a window on display at a Lowe's in Atlanta. Americans in June cut their spending at retail businesses for the third consecutive month, as a weak job market made consumers more cautious.

WASHINGTON — The outlook for the U.S. economy appeared dimmer Monday after a report that Americans spent less at retail businesses for a third consecutive month in June.

The report led some economists to downgrade their estimates for economic growth in the April-June quarter. Many now think the economy grew even less than in the first quarter of the year, when it expanded at a sluggish 1.9 percent annual rate.

Spending in June fell in nearly every major category — from autos, furniture and appliances to building, garden supplies and department stores. Overall, retail sales slid 0.5 percent from May to June, the Commerce Department said.

Retail sales hadn’t fallen for three straight months since the fall of 2008, at the height of the financial crisis.

The weak U.S. spending figures were announced on the same day that the International Monetary Fund slightly lowered its outlook for global growth over the next two years. Stocks fell after the Commerce report was released. The Dow Jones industrial average sank 50 points, regaining some losses in early trading Monday.

“However hard you look, there’s just no good news in this report at all,” said Paul Ashworth, chief U.S. economist at Capital Economics.

Weakening retail spending could make the Fed more likely to take further steps to try to lower long-term interest rates to encourage more borrowing and spending. The Fed’s policy committee will meet at the end of the month.

Most economists don’t expect the Fed to announce new action after that meeting. But some said Monday’s Commerce report, coming after three straight months of tepid hiring, makes Fed action more likely before year’s end.

Retail sales were still 4.7 percent higher in the April-June period than in the second quarter of 2011. And retail sales don’t include spending on services, a larger portion of the economy.

Still, Ashworth said overall economic growth likely slowed to an annual rate of just 1.5 percent in the second quarter. That isn’t enough to lower high unemployment. The U.S. unemployment rate is 8.2 percent.

In Monday’s report, the Commerce Department also said Americans spent less in April than previously thought. In part because of that, Michael Feroli, an economist at JPMorgan Chase, lowered his estimate of growth in the April-June quarter from a 1.7 percent annual rate to a 1.4 percent rate.

Chris G. Christopher Jr., senior economist at IHS Global Insight, said IHS thinks the economy grew at an annual rate of just 1.3 percent in the April-June quarter. The annual growth rate will likely stay below 2 percent in both the third and fourth quarters, he said.