U.S. retailers had and unexpected dropped in sale during June and it’s curbing optimism about the strength in the second quarter after a dismal first quarter GDP.
Purchases decreased 0.3 percent after a 1 percent advance in May that was smaller than previously reported, by the Commerce Department. Many economists had predicted a 0.3 percent gain, but when the numbers came in eight of 13 major retail categories showed declines in demand.
An early Memorial Day holiday may have boosted sales in May at the expense of June’s reading and a longer school year caused by the harsh winter probably contributed to the more subdued sales performance for the quarter.
If you live on Main Street you’re income probably hasn’t grown enough to make any additional purchases over the basics. While productivity has increased by 74 percent between 1973 and 2013 wage increases have only increased 9 percent, some much for trickle-down economics! At some point our plutocrats in Hollywood East and their friends on Wall Street will have to come to an understanding that Main Street simply can’t buy goods and services on non-living wages and part-time jobs.
The weakness in the second quarter index is fairly broad-based, and even worse hit are categories that you would consider to be seasonal in nature, putting cold water on the idea that the consumer was gathering momentum.”
Another report Tuesday showed the cost of goods bought abroad dropped in June, restrained by automobiles. The import-price index declined 0.1 percent last month after advancing 1.2 percent in May, according to Labor Department figures.
Excluding fuels, prices fell 0.2 percent last month. The cost of foreign cars decreased 2 percent over the past year, the biggest 12-month drop in data going back to 1981.
The Commerce Department’s report on sales showed auto dealers, restaurants, furniture and clothing stores were among the retailers that showed declines last month.
While the drop in autos in June was in line with industry data released earlier this month and the auto industry remains one of the few bright spots.
Cars and light trucks sold at a 17.1 million annualized rate in June, down from a 17.7 million pace in May, figures from Ward’s Automotive Group showed. It capped the strongest quarter since 2005. Auto sales so far in 2015 have averaged a 16.8 million rate, beating last year’s 16.4 million that was the strongest in eight years.
Retail sales excluding autos fell 0.1 percent after a 0.8 percent increase in May, Tuesday’s report showed and a projected to rise of 0.5 percent, according to more economists surveyed before the report came out.
Core sales, the figures that are used to calculate gross domestic product and excludes categories like autos, gasoline stations and building materials, declined 0.1 percent last month after increasing 0.7 percent in May and the forecast was for a 0.3 percent gain.
Demand may have been delayed because the school year in parts of the country extended more into June than usual to make up for days missed during inclement weather this winter, Consumers have been pocketing the savings from lower fuel costs. The average cost of a gallon of regular gasoline was $2.77 on July 12, according to AAA, the biggest U.S. auto group. While that’s up from an almost six-year low of $2.03 in January, it’s still far short of last year’s high of $3.70.
The job market has been a strong point, at least on paper. Filings for unemployment benefits have held below 300,000, a level that economists say is consistent with a healthy labor market, for the past 18 weeks. The unemployment rate dropped in June to 5.3 percent, the lowest since April 2008, but the participation rate is dismal.
Employers have added to payrolls at a steady pace in 2015 even as the economy slumped in the first quarter. Hiring gains have averaged 208,330 a month this year after a 259,670 average in 2014 that was the best since 1999, but most are low wage jobs, not to mention most aren’t living wage jobs. Further progress on wage growth is sorely needed to propel consumer spending in the second half of the year. While wages for private sector employees in the first quarter were running at their fastest pace since 2008, according to the employment cost index, other measures are less encouraging. Average hourly earnings climbed 2 percent in the year ended June, matching the average for the six-year expansion. Tuesday’s report probably means that economists will lower second-quarter consumption and growth forecasts.
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