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Retail sales down three months in a row: why economy is cooling

Behind the economic gloom that has seen retail activity decline for three straight months are a weak job market, high debt loads, even fears of the looming 'fiscal cliff.'

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A shopper is seen through a window on display at a Lowe's store in Atlanta in this June 19 file photo. Americans cut their spending at retail businesses for a third straight month, as retail sales fell 0.5 percent in June from May, the Commerce Department reported on July 16.

David Goldman/AP

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US shoppers spent less at retail stores in June for the third straight month, a sign of the economic doldrums weighing on the job market – and on voters as they prepare to cast ballots in a presidential election this fall.

Overall, retail sales fell 0.5 percent in June compared with the prior month, the Census Bureau reported Monday. Weakness was visible across the board, from auto sales to building supplies and department stores.

Taking the past three months together, second-quarter retail sales declined by 0.2 percent compared with the first three months of the year.

In a normal economic recovery, growth in spending by consumers provides fuel for employers to add jobs. And as people see more jobs being created, they feel more confident to spend. That "virtuous cycle" of progress has been operating at only a tepid pace since 2009.

The recent backsliding on the retail front comes just as President Obama and Republican challenger Mitt Romney have been ramping up their campaigns. If the cooling trend persists, that would make the electoral road tougher for Mr. Obama and boost Mr. Romney’s pitch that it's time for turnover at the White House.

The grim retail sales have coincided with a slack period for job creation. The Labor Department's latest employment report, released July 6, marked the third straight month in which the economy added fewer than 100,000 new jobs.

What's going on?

Consumer spending has been held back in part by high debt loads, slow wage growth, and worries by many families about job security. A disappointing stock market, gyrating in part on concerns about economies overseas such as in Europe and China, hasn't helped.

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