Retail sales dropped in July, government data showed, reinforcing concerns among economists that consumers won't spend enough to help a recovery take hold. But Friday is expected to bring better news: July inflation is expected to have remained flat, and industrial production is likely to have grown for the first time in nine months. Thursday's retail sales report served as a reality check for an economy that lately has 
appeared poised to emerge from recession and grow again. Consumer spending powers about 70 percent of economic activity. The Cash for Clunkers rebate program helped give auto sales their biggest jump in six months in July, but sales sank elsewhere. Gas stations, department stores, ectronics outlets and furniture stores all suffered. Overall, sales fell 0.1 percent, the Commerce Department said, after two months of modest gains. Economists had expected a 0.7 percent increase. Excluding autos, sales fell 0.6 percent, also much worse than predicted. Unemployment, flat wages, tighter credit, fear of layoffs and the urge to save more have caused many consumers to spend less. Shrinking home equity and stock portfolios have compounded the problem. As a result, "households are in no position to drive a decent economic recovery," Paul Dales, U.S. economist at Capital Economics, wrote in a note to clients. Even Wal-Mart Stores Inc., which had managed to post robust sales during the recession, reported an unexpected drop in quarterly earnings. The company faulted lower prices for groceries and other products. But it warned that the economy continues to force customers to scale back their purchases. Still, low prices should provide some comfort for consumers. The worst recession since World War II has kept prices in check, as workers can't demand higher pay due to the scarcity of jobs. Companies have been unable to boost prices because of weak demand.
Source : http://www.mercurynews.com/business/ci_13073650?nclick_check=1
appeared poised to emerge from recession and grow again. Consumer spending powers about 70 percent of economic activity. The Cash for Clunkers rebate program helped give auto sales their biggest jump in six months in July, but sales sank elsewhere. Gas stations, department stores, ectronics outlets and furniture stores all suffered. Overall, sales fell 0.1 percent, the Commerce Department said, after two months of modest gains. Economists had expected a 0.7 percent increase. Excluding autos, sales fell 0.6 percent, also much worse than predicted. Unemployment, flat wages, tighter credit, fear of layoffs and the urge to save more have caused many consumers to spend less. Shrinking home equity and stock portfolios have compounded the problem. As a result, "households are in no position to drive a decent economic recovery," Paul Dales, U.S. economist at Capital Economics, wrote in a note to clients. Even Wal-Mart Stores Inc., which had managed to post robust sales during the recession, reported an unexpected drop in quarterly earnings. The company faulted lower prices for groceries and other products. But it warned that the economy continues to force customers to scale back their purchases. Still, low prices should provide some comfort for consumers. The worst recession since World War II has kept prices in check, as workers can't demand higher pay due to the scarcity of jobs. Companies have been unable to boost prices because of weak demand.Source : http://www.mercurynews.com/business/ci_13073650?nclick_check=1
