If three examples make a trend, as the old journalistic convention holds, then we have a new trend in retail sales — and it's a bad one for the economy.
The Commerce Department reported Monday that retail sales fell for the third month in a row in June, and the drop last month was a steep one of 0.5 percent. Gas prices, which have fallen about 50 cents a gallon since earlier in the year, account for part of the decline, but core sales excluding cars and gas still fell 0.2 percent, worse than expected. The government also revised lower the sales figures for April, making the second quarter of the year look even more dismal. The June plunge marks the first time since the recession in 2008 that consumers have pulled back on their buying for three consecutive months (see chart below).
"Retail sales have hit a brick wall, plain and simple," economist Chris G. Christopher Jr. of IHS Global Insight wrote in a note to clients. Combined with declining consumer confidence numbers — data for July released Friday found Americans the most pessimistic they've been all year — today's sales figures provide more evidence that slowing growth is weighing on consumers. "The American consumer is not in a healthy state," Christopher wrote. "Most households face strong headwinds." And Jim O’Sullivan, chief U.S. economist at High Frequency Economics, called the pattern “recession-like” in a note published Monday.
The malaise among consumers, who drive some 70 percent of the economy, could mean more ills still to come. "Weaker demand will give businesses yet another reason to be cautious in their hiring," Scott Hoyt, the senior director of consumer economics at Moody's Analytics, wrote Monday. And it will give Ben Bernanke and his colleagues at the Federal Reserve more to mull as they weigh another round of economic stimulus.