US retail sales weighed down by falling auto demand

School teacher Liza Gleason shops for back to school supplies at a Target store August 13, 2008 in Daly City, California. With stores gearing up for back to school shopping, the Commerce Department reported that retail sales fell 0.1 percent in July, the first time in five months.Photo: AFP

US retail sales declined a negative 0.1 percent in July in the face of slumping car and truck sales as Americans cut back on large purchases, a government report showed Wednesday.
The Commerce Department's monthly snapshot showed that American consumers are continuing to feel the pinch from a lengthy housing slump, a widespread credit crunch and high oil prices.
The decline in sales was the first since February, although most economists had predicted a drop.
"The July retail sales report was much as expected. Plunging vehicle sales dragged down the headline figure, and the rise in ex-autos spending will have been eaten up by higher food and gasoline prices," said Nigel Gault, chief US economist at Global Insight.
Excluding car and truck purchases, retail sales rose 0.4 percent in July from the prior month.
The report will likely bolster the outlook of some economists who say the world's largest economy is slowing and will post lackluster growth in future months, especially as retail sales represent a key economic driver.
Sales contracted last month despite the Bush administration injecting a giant 168-billion-dollar stimulus into the economy this summer which was stuffed with one-off tax rebates aimed at firing up consumer spending.
Some analysts said that the ill economic winds have likely made consumers more wary about spending.
"Cautious and uncertain consumers are watching their wallets and with the back-to-school shopping season underway, that does not bode well for retailers," said Joel Naroff, chief economist at Naroff Economic Advisors.
The report was released as Macy's, the large retailer, revealed a 2.1 percent decline in same-store sales during the second quarter.
The fall in July sales came as the Federal Reserve opted to keep its key interest rate on hold at 2.0 percent earlier this month and economists said the central bank is likely to keep the rate suppressed as long as retail activity remains sluggish.
The decline in sales was largely due to falling car and truck sales which have been hit by high fuel prices this year, although oil prices have cooled notably in recent weeks.
Sales of motor vehicles and parts fell a negative 2.4 percent, after posting a contraction of 2.1 percent in June, marking the sharpest dip since April.
Major auto manufacturers such as General Motors, Ford and Chrysler have all endured declining sales in recent months as consumers have shunned gasoline-guzzling trucks and sport utility vehicles (SUVs).
Despite the lingering housing downturn, furniture and home furnishings stores saw a 1.0 percent increase in sales, marking the largest such gain since January of last year.
The increase in furniture sales could offer a glimmer of hope to the stressed housing industry which fell into a slump over two years ago.
Sales at electronic and appliance stores rose 0.8 percent in July after posting a negative 0.8 percent dip in June, while gasoline station sales jumped 0.8 percent from 4.0 percent in the prior month.
Gasoline station and supermarket sales have been stoked higher by increased commodity prices.
While some sectors posted improved turnover, economists say the world's largest economy will struggle for momentum into 2009.
"The consumer is still under enormous pressure as employment is declining, real wages are down, housing and stock market wealth are down, and credit conditions continue to tighten. And the surge of stimulus payments is now over," Gault said.
Bar and restaurant sales declined a negative 0.2 percent, following a rise of 0.3 percent in June suggesting that Americans -- who are renowned for dining out -- may be eating more at home.
The picture improved somewhat looking back in the rear-view mirror as the government revised June retail sales slightly higher to show a gain of 0.3 percent compared with an original tally of 0.1 percent.