Sales, jobs data show consumers’ strain

(Updated, 1:15 p.m.)

WASHINGTON – U.S. retail sales posted an unexpected drop in July as the “Cash for Clunkers” vehicle rebate program failed to offset declining consumer spending, Bloomberg News reported today.

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The U.S. Commerce Department said retail sales fell 0.1 percent in July, the first decline in three months, after rising a revised 0.8 percent in June. A Bloomberg survey of 76 economists had predicted a 0.8 percent rise in sales.

Excluding automobile sales, which climbed 2.4 percent in July, purchases fell 0.6 percent, which was also more than the 0.1 percent increase forecast by the economists surveyed. Excluding gasoline, retail sales rose 0.1 percent in July after increasing 0.3 percent in June.

In addition, the U.S. Labor Department said today that 558,000 people filed first-time claims for jobless benefits last week, up from 554,000 the week before, Bloomberg said.

“Until we start seeing job growth, consumers are still going to be very cautious,” Michael Gregory, a senior economist at BMO Capital Markets in Toronto, which accurately forecast the drop in purchases excluding automobiles, told Bloomberg. “It’s premature to talk about the sustainability of a recovery,” he said, until there’s “follow-through on the demand side.”

Americans spent less on furniture, electronics, building materials, groceries and sporting goods in July, and the 1.6 percent drop in department store sales was the largest so far this year, Bloomberg said.

“It’s hard to find anything encouraging in this report,” David Resler, chief economist at Nomura Securities International Inc. in New York, told Bloomberg. “For the most part, discretionary spending is in the tank.”

The economy has lost roughly 6.7 million jobs since the recession started in December 2007, more than in any other downturn since the Second World War. U.S. gross domestic product contracted at a 1 percent annual rate in the second quarter, the fourth consecutive drop.