Washington: US retail sales rose less than expected in June, the latest sign of a slowdown in economic growth that could argue against the Federal Reserve’s plan to start trimming its monetary stimulus later this year.
But growth is not slowing abruptly, with other data on Monday showing factory activity in New York state accelerating in July as new orders and employment improved.
Retail sales increased 0.4 per cent last month, lifted by demand for automobiles and higher gasoline prices. However, sales of building materials fell by the most in a year, a potentially worrying sign for the housing market.
Sales had increased 0.5 per cent in May. Economists polled by Reuters had forecast retail sales, which account for about 30 per cent of consumer spending, rising 0.8 per cent in June.
So-called core sales, which strip out automobiles, gasoline and building materials and correspond most closely with the consumer spending component of gross domestic product, edged up 0.1 per cent after rising 0.2 per cent in May.
“It provides no additional evidence that the economy is gaining momentum,” said Annalisa Piazza, a senior economist at Newedge Strategy in New York. “It doesn’t allow the Fed’s chairman [Ben Bernanke] to have a firmer tone as the US economic recovery remains gradual.”
US stock index futures held their gains, while Treasuries trimmed losses. The dollar pared gains versus the yen.
The suggestion of slower domestic demand as well as recent weak trade data comes as the Fed is debating cutting back the $85 billion (Dh312 billion) in bonds it is purchasing each month to keep borrowing costs low and stimulate the economy.
Bernanke said last month that the central bank would start tapering its purchases later this year and would likely bring the programme to a complete close by the mid-2014 if the economy progressed as it expected.
But he has since stressed that the Fed needed to keep a stimulative monetary policy in place given the low level of inflation and a still-high unemployment rate. Bernanke will testify to congress on the economy later this week.
The slowdown in growth in the second quarter mostly centred around consumer spending, trade and manufacturing. But there are hopeful signs for the factory sector.
A separate report showed the New York Fed’s ‘Empire State’ general business conditions index rose to 9.46 this month from 7.84 in June. A reading above zero indicates expansion in the region’s factories.
The survey’s measure of new orders rebounded into positive territory, while gauges of employment improved.
A brightening labor market picture is helping to support spending. Last month, receipts at auto dealerships rose 1.8 per cent after advancing 1.4 per cent the prior month. Excluding autos, sales were flat after rising 0.3 per cent the prior month.
Sales at building materials and garden equipment suppliers fell 2.2 per cent, the weakest reading since May last year.