Retail sales drop 0.5 percent in June

Retail sales fell in June for the second straight month, more evidence that the U.S. economic recovery will slow in the second half of the year.

Retail spending dropped 0.5 percent in June, the Commerce Department reported Wednesday. That followed a 1.1 percent fall in May. Excluding autos, spending was down 0.1 percent in June.

Much of the weakness last month came from a drop in auto sales and a decline in gasoline prices. Excluding autos and gasoline, sales would have risen 0.1 percent in June after having plunged 1 percent in May.

Americans are spending less and that could threaten the pace of the recovery. Consumer spending accounts for 70 percent of economic activity. But consumers have held back because of high unemployment and other signs that have dampened their confidence, such as the volatile stock market and a struggling housing market.

The June decline in retail sales was larger than the 0.2 percent fall that economists had expected.

The overall number was dragged down by a 2.3 percent plunge in auto sales, the biggest monthly drop since auto sales fell 2.5 percent in February.

Also, falling fuel prices pulled down gasoline stations sales by 2 percent.

Some industries showed signs of strength in June. Department stores sales posted a 1.1 percent gain. The larger category of general merchandise stores, which includes such big retailers such as Wal-Mart, posted a 0.2 percent increase, but that followed a 1 percent drop in May.

Sales at speciality clothing stores were up 0.6 percent in June. Sales at appliance stores posted a 1.3 percent advance. But there was weakness at hardware stores, where sales dropped 1 percent, and at furniture stores, which saw a decline of 1.1 percent.

The retail sales report follows a reading last week from the nation's big retailers showing modest growth in June. The International Council of Shopping Centers' index showed a 3 percent gain in sales for the month, compared to the same month a year ago. The index tracks sales at stores open at least a year.

Diminished consumer spending could drag on overall economic growth.

Growth slowed to 2.7 percent in the first three months of this year and many analysts believe it won't be much better in the April-June quarter. Some are looking for growth to slow to around 2.5 percent in the final half of this year.

Growth at such a low level would raise concerns that the country could fall back into a recession. Most economists think that is unlikely. But they do worry that growth will slow to such an extent that it won't bring down the 9.5 percent unemployment rate.