With increased weariness about the economy, more consumers are cutting back on spending. The Census Bureau reported that retail sales fell 0.5 percent in June, declining for the third consecutive month. Gasoline station sales led the declines, which were down 1.8 percent, with falling petroleum costs being one of the contributing factors.
Other sectors with falling sales included building materials (down 1.6 percent), sporting goods and hobbies (down 1.6 percent), home furnishings (down 0.8 percent), electronics and appliance (down 0.8 percent), and motor vehicles (down 0.6 percent).
There were some pockets of growth. Nonstore retailers and miscellaneous store retailers both had sales increases of 0.5 percent. Apparel and grocery stores also had more sales, up 0.2 percent and 0.1 percent respectively.
Mostly, though, this report was another indication that growth in the U.S. economy has eased somewhat in recent months. Year-over-year retail sales are now up 3.8 percent, down from 5.1 percent in May and 6.8 percent in December. This is as disappointing as it is consistent with other measures.
One such indicator was the National Association of Business Economists’ Industry Survey, which was released this morning. Panelists who responded to this survey were less optimistic about the outlook as well as their own company’s business activity. The percentage of those reporting rising sales dropped from 60 percent in April to 39 percent in July. Similar declines were seen for profits, employment, and capital spending. On the positive side, pricing pressures have eased.
Business economists mostly downgraded their GDP estimates for the next 12 months. Whereas nearly two-thirds of them said that they anticipated real GDP to rise between 2.1 to 3.0 percent three months ago, that figure fell to 56 percent this time. Ten percent more economists anticipate growth of between 1.1 to 2.0 percent that before (now 29 percent of panelists). This, of course, is in line with others reports which show real GDP growing by less than expected, including from the Federal Reserve and others. I have downgraded my growth estimates for 2012 from 2.6 percent a few months ago to 2.0 percent now.
Part of the lower growth estimates stems from worries about the European situation and the upcoming fiscal cliff. In the goods-producing sectors (which includes manufacturing), 79 percent said that they had experienced some decline in their company’s sales year-to-date as a result of the European crisis. At the same time, 83 percent of those in the goods-producing sectors expect their sales to be negatively impacted by the expiration of the 2001 and 2003 tax cuts at the end of the year. For both of these figures, the goods-producing areas had the largest expected impacts of any sector.
Chad Moutray is chief economist, National Association of Manufacturers.