Sales in June fall 1.1%, weaker than expected, from a revised 1.4% gain in May.
July 14, 2004: 9:34 AM EDT
NEW YORK (CNN/Money) - Retail sales fell 1.1 percent in June, the government said Wednesday, a weaker-than-expected decline triggered by a drop-off in auto sales.
Last month's decline followed an increase in May, when sales rose a revised 1.4 percent instead of 1.2 percent as originally reported, according to the Commerce Department.
The department reported sales for June totaled a seasonally adjusted $333.9 billion.
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Excluding autos -- which account for about a quarter of total sales and can fluctuate widely from month to month -- sales fell 0.2 percent to $257 billion from a revised 0.9 percent gain in May.
Economists on average had expected total sales to fall 0.7 percent and sales excluding autos to rise 0.2 percent, according to Briefing.com.
"This is not a very pretty picture," said Delos Smith, economist with the Conference Board. "The higher gasoline prices had more of an impact that most had expected."
"The current average price of $1.90 a gallon is still about 40 cents higher than the level a year ago. So the effect of higher prices will be felt for some time," Smith said, adding that retailers may have to brace for a softer back-to-school season.
But at least one industry watcher said he wasn't too concerned about the slowdown in sales.
"This is the pause that refreshes. This is not a doomsday scenario," said Michael Niemira, chief economist and director of research for the International Council of Shopping Centers (ICSC).
"Our analysis of the leading sales indicator, ex-auto, suggests some slowdown now through the fall. So we could see some up and down results for the next few months," Niemira said.
Some backtracking was expected, he said, given the robust pace of retail sales in the first-half of the year. "With the acceleration of the broader economy, the retail sector's growth was fueled primarily by the upper-income consumer," Niemira said.
"Growth was reinforced early in the year by other income strata," he said. "But those middle and low-income consumers were hurt by higher gas prices in May and June. Sales should recover because there is still demand out there. June was also hit by a change in incentives from automakers."
Weakness was seen in categories across the board. Sales of autos and auto parts fell 4.2 percent from a revised 6.7 percent gain in May. Sales at gas stations fell 1.2 percent from a revised 8.8 percent gain in May.
Sales at general merchandise stores fell 5.6 percent, compared with a revised 6.4 percent gain in the prior month, while clothing sales fell a steep 7.2 percent versus a revised 2.2 percent rise in May.
However, sales of electronics products and sporting goods escaped the downtrend. Electronics sales rose 3.7 percent, compared to a revised 5.9 percent gain in the previous month. Sales of sporting goods, books and music rose 6.4 percent versus a revised 1.0 percent gain in the prior month.
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