Retail Sales Fell in July Despite Clunkers Program

Retail Sales Fell in July Despite Clunkers Program
U.S. retail sales unexpectedly fell in July despite the debut of the gov't's "cash for clunkers" program meant to jump-start the auto business & help turn around the economy. Separately, U.S. businesses let inventories tumble again in June & got solid help from a surge in sales that cleared away some of excess supply built up in the long recession. Retail sales last month fell 0.1%, the Commerce Dept said. The dip was a huge disappointment on Wall Street. Vouchers for the car rebate program weren't available til the last part of July; perhaps the program will have a more positive effect on overall retail sales for Aug. Demand for goods from cars took a large tumble last month, with big declines for housing-related retailers & electronic stores. Excluding autos, all other retail sales slid 0.6%; economists expected a 0.1% gain. Economists Dow surveyed forecast a 0.8% increase in July retail sales. June sales rose 0.8%, revised up from originally reported 0.6% rise. Consumer spending makes up 70% of GDP, which is the broad measure of U.S. economic activity. The recession's cost 6.7M jobs. Household debt is high & net worth shrunk. People are cutting spending & paying bills. In the 2nd-Q, their spending surprisingly fell, an omen for the expected recovery of the economy. Evidence suggests the economy stopped contracting in the 2nd-Q & will resume rising, bringing an end to the recession. The latest of a monthly survey of over 50 business economists sees growth in the 2nd half of 09 & in 2010. The Blue Chip Economic Indicators report predicted GDP would grow at an annual rate of 2.2% in the current, 3rd-Q & 2.3% in 4th-Q. One thing that can propel the economy is surging fed gov't spending. Treasury numbers showed the U.S. ran a budget deficit a 10th straight time in July. Cash for clunkers has been credited for driving car sales. The retail report showed auto & parts sales in July rose by 2.4%, after rising 1.9% in June. The fed scrappage program is meant to spur Americans to trade in gas guzzlers for more fuel-efficient vehicles. Vouchers were available starting in July. Its purpose is stimulating the economy by boosting car sale & jump-starting industry seriously damaged by the recession. 2/3 of Big 3 carmaker's in bankruptcy proceeding, GM & Chrysler. Dealers requested reimbursement for 292,447 vouchers issued under the clunkers program totaling $1.23B. The retail data said July station sales fell 2.1%. Excluding gas sales, other retailers' sales rose 0.1%. Retail sales excluding autos & gas decreased 0.4% in July, the fifth drop in a row. Furniture retailers fell 0.9% and building material & garden supplies dealers slid 2.1%. Food & beverage stores fell 0.3%. Electronic & appliance stores dove 1.4%. General merchandise stores slid 0.8%. Sporting goods, hobby, book & music stores fell 1.9%. There were some increases: Health & personal care stores, up 0.7%; restaurants & bars, up 0.4%; clothing stores, up 0.6%; & mail order and Internet retailers, up 0.1%.
Business Inventories Drop
Inventories decreased 1.1% from the prior month to a seasonally adjusted $1.350T, Commerce Dept said. Business sales soared by 0.9% to $975.8B in June. May sales were flat, revised from an originally reported 0.1% dip. The sales increase added to evidence the recession, is at an end or nearing one. Higher demand will help clear away unwanted supply. Eventually, companies will have to restock shelves, boosting production & economic growth. May inventory fell 1.2%, May inventories were seen down 1.0%. Economists Dow survey forecast a 0.8% drop in June inventories. The inventory-to-sales ratio slid in June, to 1.38 from 1.41 in May. The gauge indicates how well firms are matching supply with demand by measuring how long, in months, a firm could sell all current inventory. Economists refer to it when trying to assess whether firms are burdened with unsold goods. A year earlier, the I/S ratio was 1.26. June's level of 1.38 indicates level of stockpiles remains elevated & that more inventory liquidation is to come in the latter part of this year, though unlikely at the rates in the first half of 09. Year over year, inventories were down by 9.8% since June 08; sales were 18.0% lower. June 09 manufacturing sector stockpiles of goods decreased 0.8% from May, after falling 0.8% in May. U.S. wholesalers' inventories slid 1.7%, after falling in May by 1.2%. Retailers' stocks of goods slid by 1.0%, after falling 1.7% in May. Auto dealer inventories fell 2.8%. Excluding the auto component, other retail stocks fell 0.3% in June after falling 0.7% in May. June inventory fell 0.4% at clothing stores; 2.2% at building materials, garden equipment & supplies stores; 0.2% at furniture stores & 0.5% at food & beverage stores. Inventories rose by 0.8% at general merchandise stores.