U.S. Retail Sales Fall for First Time in Five Months

By Bob Willis

Aug. 13 (Bloomberg) -- Sales at U.S. retailers dropped in July for the first time in five months as record gasoline prices and tighter credit reduced automobile purchases.

The 0.1 percent drop followed a 0.3 percent gain the prior month that was larger than previously reported, the Commerce Department said today in Washington. Sales excluding automobiles rose 0.4 percent, less than anticipated.

The sales drop came even as the Treasury distributed tax rebates as part of the government's fiscal stimulus plan. Consumer spending, which accounts for more than two-thirds of the economy, is likely to keep fading, hurt by rising unemployment, falling property values and elevated fuel costs.

``With the tax-rebate effects dissipating and the labor market weakening, we should see consumer spending slow through the remainder of the year,'' said Dana Saporta, an economist at Dresdner Kleinwort in New York, which correctly forecast sales excluding autos.

The Labor Department reported separately that prices of imported goods rose 1.7 percent in July from the previous month, after a 2.9 percent increase in June.

Treasuries were little changed after the reports, with benchmark 10-year notes yielding 3.89 percent at 9:21 a.m. in New York, from 3.90 percent late yesterday.

Retail sales excluding gasoline fell 0.2 percent, the Commerce Department said.

Economists' Forecasts

The drop in total sales matched the median estimate of 75 economists surveyed by Bloomberg. Forecasts ranged from a drop of 1 percent to a gain of 0.6 percent. June sales were previously reported as having increased 0.1 percent. The median projection for sales excluding autos was for a 0.5 percent gain.

Americans are buying fewer cars as gasoline prices soar. Today's report showed sales at automobile dealerships and parts stores dropped 2.4 percent.

That's consistent with industry figures that indicated Americans are shunning big-ticket purchases. Cars and light trucks sold in July at a 12.5 million annual pace, the weakest since 1993, according to data issued earlier this month.

Filling station sales rose 0.8 percent in July after jumping 4 percent the prior month, today's report showed.

Gas Prices

Regular unleaded gasoline reached an average monthly record of $4.06 a gallon in July, a cent higher than in June, according to AAA. Prices have since declined. Food prices also rose, sending shoppers to discount stores in search of bargains.

Banks are making it harder for consumers to get credit after posting billions of dollars of losses amid the slide in securities tied to mortgages.

Most U.S. lenders ``reported having tightened their lending standards and terms on all major loan categories over the previous three months,'' the Fed said Aug. 11 in its quarterly Senior Loan Officer Survey.

Today's Commerce report indicated Americans spent the cash from tax rebates on more than just gasoline. Sales at furniture stores rose 1 percent, the most since January 2007, and climbed 0.8 percent at electronics outlets.

Purchases at general merchandise retailers increased 0.3 percent.

Excluding autos, gasoline and building materials, the retail group the government uses to calculate gross domestic product figures for consumer spending, sales gained 0.3 percent, after a 0.5 percent increase in June. The government uses data from other sources to calculate the contribution from the three categories excluded.

Wal-Mart Outlook

Wal-Mart Stores Inc. last week said same-store sales will probably slow this month after rising 3 percent in July because most shoppers have already received their tax rebates.

More than 90 percent of the estimated $100 billion in rebate checks forecast to go out this year had been sent as of mid-July, with another $10 billion from revised returns forecast for next year, the Treasury Department said.

Customers bought groceries, flat-panel televisions and video games, while apparel and home goods were ``slightly negative,'' Wal-Mart said. Consumers are spending ``more cautiously'' as stimulus checks end, Eduardo Castro-Wright, the Bentonville, Arkansas-based retailer's head of U.S. stores, said in a statement.

Spending, which has grown every quarter since 1992, may stall in the last three months of this year after growing at a 0.6 percent annual pace from July to September, according to the median estimate of economists surveyed by Bloomberg from Aug. 1 to Aug. 8. Figures from Commerce on July 31 showed spending grew at a 1.5 percent pace in the second quarter.

The world's largest economy will expand at an average 0.7 percent annual pace from July through December, half the gain in the first six months of the year, according to economists surveyed.

To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net