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Retail sales in U.S. stagnate amid poor job market

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Retail sales in the U.S. unexpectedly stagnated in August as a lack of jobs restrained shoppers, highlighting the risk the economy will stall.

The unchanged reading followed a 0.3-percent gain for July that was smaller than previously estimated, Commerce Department figures showed Wednesday. The median forecast of 83 economists surveyed by Bloomberg News was a 0.2-percent rise.

Chains like Best Buy Co. and Target Corp. say a struggling labor market that’s battered confidence is hurting sales. The dim outlook for household spending, which accounts for about 70 percent of the economy, means it will be harder for the two-year old recovery to gain speed.

“Consumers are being more cautious given all the economic headwinds,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. “Policy makers have to be focused on growth because growth seems to have come close to stalling in August.”

Wholesale prices were also little changed in August as costs decreased for energy and automobiles, according to a Labor Department report released Wednesday. The producer price index was unchanged after a 0.2-percent increase in July. The so-called core measure, which excludes volatile food and energy, rose 0.1 percent, less than forecast.

Eight of 13 major retail categories showed increases last month, led by grocery and sporting goods stores. Demand declined for big-ticket items like automobiles and furniture. Sales at clothing stores dropped 0.7 percent, the biggest decrease since December.

Retail sales aren’t adjusted for inflation, indicating demand may have dropped after taking prices into account.

Purchases at automobile dealers dropped 0.3 percent after rising 0.2 percent in July, the report showed. The results are in sync with industry figures. Cars and light trucks sold at a 12.1 million seasonally adjusted annual rate in August, down from a 12.5 million pace in the first half of the year and little changed from July, according to researcher Autodata Corp.

Purchases excluding autos increased 0.1 percent. They were projected to rise 0.2 percent, the survey median showed.

Excluding autos, gasoline and building materials, which are the figures used to calculate gross domestic product, sales were unchanged, the weakest performance so far this year, after a 0.3-percent increase in July.

Spending on so-called big-ticket items such as cars and appliances is threatened by a lack of job creation. Payrolls in the world’s largest economy stagnated last month and unemployment held at 9.1 percent, Labor Department figures showed earlier this month.

The risk of a broader pullback in the economy has increased pressure on the Fed, Obama administration and Congress to step up efforts to spur the economy.

A plan from President Barack Obama, announced before a joint session of Congress on Sept. 8, called for an extension of a payroll-tax break for Americans and unemployment assistance. He also pushed for a payroll tax break for small businesses, an increase in infrastructure spending and more aid for cash- strapped state governments.

A majority of Americans don’t believe Obama ’s $447 billion jobs proposal will help lower the unemployment rate, a Bloomberg National Poll conducted Sept. 9-12 showed.

The downbeat assessment of the American Jobs Act reflects a growing and broad sense of dissatisfaction with the president. Americans disapprove of his handling of the economy by 62 percent to 33 percent, The disapproval number represents a 9-point increase from six months ago.

Best Buy, the world’s largest consumer-electronics retailer, Tuesday cut its full-year earnings forecast. The Richfield, Minn.-based chain also reported a 30-percent decline in second-quarter profit.

“The consumer is making very measured choices,” CEO Brian Dunn said. “I don’t think it’s a year where someone is going to buy a TV and a tablet and a new smartphone and go to Disneyland.”

Sales gains at Minneapolis-based Target, the second-largest U.S. discount retailer, are “a bit more challenging” than expected at the beginning of the year, Douglas Scovanner, chief financial officer, said at a Sept. 8 conference.

Plano, Texas-based J.C. Penney Co., like other retailers, is seeing less mall traffic and more cautious consumer spending on non-essential products, according to CEO Myron Ullman.

“Everybody wishes the economy were better, the job growth, real income growth and the things that drive the economy were more vibrant,” he said in a Sept. 7 conference presentation. “The upper-income customer, with more exposure to the stock market, has been more enthusiastic about discretionary spending and the bottom quartile customer has had to make it work with high unemployment and gas prices and food prices.”
 

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