The Commerce Department reported Tuesday that retail sales grew an anemic 0.2% in June, well below expectations. Economists had predicted a 0.6% increase. June’s growth in retail sales was the slowest in 5 months. The report indicates that consumers continue to struggle for footing in the weak economy.
Retail sales for April and May were revised upward slightly, but even these changes were below the growth levels originally expected by economists. Tuesday’s disappointing report brings to a close any hope that an increase in consumer spending would put economic recovery back on track after the economy shrank in the 1st Quarter.
The economy contracted by 2.9% in the first three months of the year. Many observers attributed the bad news to an unusually cold winter and predicted a sharp economic “snap-back” in the 2nd Quarter. Mike Jakeman, global analyst with The Economist Intelligence Unit, wrote that there was “real momentum behind consumer spending” and predicted the economy “will bounce back strongly in the 2nd Quarter.”
Consumer spending accounts for around 70% of the total economy. The weakness in retail sales, led last month by big drops in restaurants and building materials, makes anything but continued stagnation unlikely.
In reporting earnings last week, the CEO of retail giant the Container Store said there was a “retail funk” in the economy.