Retail sales unexpectedly dip 0.1 percent

WASHINGTON The Commerce Department said Thursday that retail sales fell 0.1 percent last month. Economists had expected a gain of 0.7 percent.

While autos, helped by the start of the Cash for Clunkers program, showed a 2.4 percent jump -- the biggest in six months -- there was widespread weakness elsewhere. Gasoline stations, department stores, electronics outlets and furniture stores all reported declines.

The July dip was the first setback following two months of modest sales gains. Excluding autos, sales fell 0.6 percent, worse than the 0.1 percent rise economists had forecast.

Gas station sales plunged 2.1 percent, due more to falling pump prices than weak demand. Excluding the drop at gas stations, retail sales would have posted a modest 0.1 percent increase.

Department store sales fell 1.6 percent and the broader category of general merchandise stores, which includes big chains such as Wal-Mart Stores Inc. and Target Corp., posted a decline of 0.8 percent.

The July weakness highlighted worries about the potential strength of the recovery from the recession. Economists are worried that consumers could remain hunkered down which would make any recovery exceptionally weak since consumer spending accounts for about 70 percent of total economic activity.

The disappointing retail sales report followed news last week of continuing troubles at the nation's big chain stores that raised worries about the strength of the back-to-school sales.

According to the retailers' reports, mall-based apparel stores fared the worst in July. Macy's Inc. and teen retailers Abercrombie & Fitch Co. and Wet Seal Inc. reported disappointing results.

The Commerce report, however, indicated that specialty clothing and accessory stores posted a 0.6 percent gain in July, one of the few bright spots in the government report.

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