Retail sales rose less than forecast in June as demand cooled at building materials outlets and restaurants, showing the biggest part of the U.S. economy lacked momentum as the second quarter drew to a close.
The 0.4% gain followed a 0.5% increase in May that was less than previously reported, Commerce Department figures showed today in Washington. The median forecast of 82 economists surveyed by Bloomberg called for a 0.8% advance. Sales were unchanged excluding the biggest jump in automobile purchases since November.
The figures show consumer spending, which accounts for about 70% of the economy, may take time to accelerate as Americans stay frugal and rebuild savings. At the same time, cheaper borrowing costs, household wealth backed by home and stock prices and an improving job market are helping sustain demand for big-ticket items such as motor vehicles.
“The consumer was less engaged in the second quarter,” said Russell Price, senior economist at Ameriprise Financial Inc. in Detroit. Price is the second-best forecaster of retail sales over the past two years, according to data compiled by Bloomberg. “The numbers are disappointing in comparison to expectations but the overall picture is still encouraging” given job growth and improved household balance sheets, he said.
Stock-index futures held gains after another report showed manufacturing in the New York area picked up. The contract on the Standard & Poor’s 500 Index expiring in September rose 0.2% to 1,673.7 at 8:50 a.m. in New York.
The Federal Reserve Bank of New York’s general economic index climbed to 9.5, the highest since February, from 7.8 last month. Readings greater than zero signal expansion in New York, northern New Jersey and southern Connecticut. The median projection in a Bloomberg survey of 50 economists called for a reading of 5.
The world’s largest economy will expand at a 2.3% annualized pace in the third quarter after cooling to a projected 1.6% rate in the April through June period, according to the median forecast in a Bloomberg survey from July 5 to July 10. Household spending also will pick up, economists forecast.
Estimates in the Bloomberg survey for retail sales ranged from no change to a 1.3% advance. The reading for May was revised from an initially reported 0.6% increase.
Receipts at restaurants and bars decreased 1.2% in June, the most since February 2008. Sales dropped 2.2% at building materials outlets, the most since May 2012. Purchases at department stores declined 1% in June.
Eight of 13 major categories showed an increase last month, led by a 1.8% gain at automobile dealers. Purchases rose 2.4% at furniture and home furnishing chains, the most since May 2012.
Retail sales excluding autos and gasoline unexpectedly fell 0.1%.
Service-station sales rose 0.7% after a 0.4% increase. Costlier gasoline in early June probably lifted receipts at filling stations. The Commerce Department’s retail sales data aren’t adjusted for changes in prices.
A gallon of regular gasoline at the pump reached $3.63 on June 9, before easing in the next few weeks to a five-month low of $3.47 on July 7, according to AAA, the biggest U.S. motoring group. Retail gasoline has again reversed course, having risen each day last week as crude oil costs surged and refinery units shut down for repairs.
Purchases excluding autos, gasoline and building materials, which render the figures used to calculate gross domestic product, rose 0.1% after a 0.2% increase in the previous month.
Automobile demand remains a bright spot as Americans replace older vehicles. Cars and light trucks sold in June at a 15.89 million annual rate, the fastest since November 2007, according to industry data from Ward’s Automotive Group. Attractive financing offers and steady hiring are also helping generate more industry sales.
Ford Motor Co. and General Motors Co., makers of the best- selling big pickups in the U.S., reported June sales that beat analysts’ estimates. Low borrowing costs and rising consumer wealth should continue to support spending, according to Jenny Lin, Dearborn, Michigan-based Ford’s senior U.S. economist.
Household wealth has been boosted by a rally in the stock market and higher property values. Home prices in the 12 months ended in April rose by the most in more than seven years, according to the S&P/Case-Shiller index of property values. The Standard & Poor’s 500 Index last week reached a record high.
“Economic indicators continue to improve,” Lin said on a July 2 sales call. The “consumer spending growth pace is slowly picking up.”
Costco Wholesale Corp., the largest U.S. warehouse-club chain, reported a 6% gain in June sales at U.S. stores open at least a year, more than analysts’ projections.
Fed Chairman Ben S. Bernanke, in testimony to Congress this week, may shed more light on the central bank’s view of the economy and how policy makers may begin scaling back $85 billion in monthly bond purchases. The U.S. needs “highly accommodative” monetary policy for the foreseeable future, he said last week.