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Published: Saturday, 6/12/2010

Dip in retail sales may slow recovery


WASHINGTON - Americans are pulling back on their spending, a trend that could slow the economic recovery if it continues.

A sharp drop in retail sales revenue for May shows that shoppers remain cautious, and it could lead economists to curtail their expectations for growth.

Meanwhile, a separate report on consumer confidence shows it has risen in June to the highest level in more than two years.

The Thomson Reuters-University of Michigan preliminary index of consumer sentiment rose to 75.5, highest since January, 2008, from 73.6 in May. It was projected to rise to 74.5, according to the median forecast in a Bloomberg News survey of 65 economists.

Analysts cautioned against overreacting to yesterday's Commerce Department report on retail sales. It could signal a return to modest growth after two unusually strong months fueled by tax refunds, rebates for energy-efficient appliances, and higher gas prices.

The 1.2 percent plunge in sales revenue was the largest drop in eight months. But excluding three of the most volatile sectors - autos, building materials, and gasoline-station sales - the figures actually rose one-tenth of a percentage point in May.

And figures for some industries can vary depending on how they are calculated.

For example, Commerce said auto sales fell 1.7 percent in May, but the industry itself has reported gains of 3.7 percent for the same period. They differ because the auto industry measures strictly sales volume of new cars; the government looks at revenue for cars, auto parts, tires, and other products across the industry.

Economists remain concerned that spending won't pick up in months ahead. Households still face near-double-digit unemployment. Private employers are not hiring fast enough to lower that number. Anxiety has gripped the stock market, partly because of the European debt crisis.

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