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Chilly spring for retail sales

Published: May 19, 2015
After a slow first quarter, hopes for a second-quarter comeback dimmed as households held back on automobile and other big-ticket purchases. A weaker-than-expected retail sales report from the Commerce Department and 10 consecutive months of declining import prices suggested the Federal Reserve would make no move to raise interest rates. Futures markets indicated that traders don't expect an interest-rate hike until perhaps December.

Despite the windfall of lower gasoline prices, sales trends are weaker as consumers apparently are saving their money instead of spending. Doldrums attributed to bad winter weather, a strong dollar, labor trouble at West Coast ports and spending cuts by energy firms have persisted throughout the second quarter.

Overall, trade and wholesale inventory data suggested that the economy contracted. Isolated pockets of growth included clothing, sporting goods, building materials and garden equipment. Online stores, restaurants and bars also reported a rise in receipts. But declining sales at auto dealerships and service stations as well as furniture, electronics and appliance stores kept second-quarter numbers down.

Still, economists are convinced of an upcoming turnaround. "We remain puzzled by the softness in retail sales given the gains in employment, real incomes from lower energy prices, and wealth, but we continue to look for consumer spending to pick up this year," says John Ryding, chief economist at RDQ Economics in New York City.