WASHINGTON – The outlook for the U.S. economy appeared dimmer Monday after a report that Americans spent less at retail businesses for a third straight month in June.
The report led some economists to downgrade their estimates for economic growth in the April-June quarter.
Many now think the economy grew even less than in the first quarter of the year, when it expanded at a sluggish 1.9 percent annual rate.
Spending in June fell in nearly every major category – from autos, furniture and appliances to building, garden supplies and department stores. Overall, retail sales slid 0.5 percent from May to June, the Commerce Department said.
Retail sales hadn’t fallen for three straight months since the fall of 2008, at the height of the financial crisis.
The weak U.S. spending figures were released on the same day that the International Monetary Fund slightly lowered its outlook for global growth over the next two years.
Stocks fell after the Commerce Department report was issued. The Dow Jones industrial average sank 74 points in early trading. Broader indexes also declined. Later in the day, stocks regained some of their losses.
However hard you look, there’s just no good news in this report, said Paul Ashworth, chief U.S. economist at Capital Economics.
Weakening retail spending could make the Federal Reserve more likely to act further to try to encourage more borrowing and spending by lowering long-term interest rates. The Fed’s policy committee will meet at the end of this month.
Most economists don’t expect new Fed action after that meeting. But some said Monday’s report, coming after three straight months of tepid hiring, makes some Fed action more likely by year’s end.
Fed Chairman Ben Bernanke will testify to Congress about the economy on today and Wednesday.