Somber sales numbers temper recovery hopes
WASHINGTON - A bleak report on retail sales Thursday reinforced a nagging worry of economists: Shoppers won't spend enough to help a recovery take hold.
The figures served as a reality check for an economy that lately has appeared poised to emerge from recession and grow again. Consumer spending powers about 70 percent of economic activity.
The Cash for Clunkers rebate program helped give auto sales to their biggest jump in six months in July, but sales sank elsewhere. Gas stations, department stores, electronics outlets and furniture stores all suffered.
Overall, sales fell 0.1 percent, the Commerce Department said, after two months of modest gains. Economists had expected a 0.7 percent increase. Excluding autos, sales fell 0.6 percent, also much worse than predicted.
Unemployment, flat wages, tighter credit, fear of layoffs and to urge to save more have caused many consumers to spend less. Shrinking home equity and stock portfolios have compounded the problem.
As a result, "Households are in no position to drive a decent economic recovery," Paul Dales, U.S. economist at Capital Economics, wrote in a note to clients.
Even Wal-Mart, which had managed to post robust sales during the recession, reported an unexpected drop in quarterly earnings. The company faulted lower prices for groceries and other products.
But it warned that the economy is also still forcing customers to scale back their purchases.
The latest figures came just a day after the Federal Reserve said the economy appeared to be "leveling out."
The Fed, signaling the recession appears to be ending, said it would hold interest rates at their current record lows.
Meanwhile, the number of newly laid-off workers seeking jobless benefits rose last week, the government said, in another sign of a weak job market. And for those who still have jobs, fear of losing them can cause them to spend less.
"The dismal job situation is the dark storm cloud hanging over consumers," said Jennifer Lee, an economist at BMO Capital Markets.
In the one bright spot in the retail sales report, Cash for Clunkers pushed auto sales up 2.4 percent in July. The popular program offers drivers up to $4,500 to trade in older vehicles and buy new, more fuel-efficient models.
But some analysts people buying cars under Cash for Clunkers might be holding that money back from other sectors of the economy w
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