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Rising Interest Rates, Fuel Costs Hurt Retail Sales

Fashion retailers showed mixed sales results last month, as department stores lost ground and specialty stores gained, according to the monthly Commerce Department report.

WASHINGTON — Fashion retailers showed mixed sales results last month, as department stores lost ground and specialty stores gained, according to the monthly Commerce Department report.

Squeezed by high gas prices and rising interest rates, sales for all retailers and food service firms retreated 0.1 percent in June compared with May, the first decline since February. Sales rose 0.1 percent in May and 0.7 percent in April.

Seasonally adjusted sales at apparel and accessories stores rose 0.3 percent in June, to $17.7 billion, 4.9 percent ahead of year-ago sales. On the other side of the ledger, sales at department stores slid 0.3 percent in June, to $17.7 billion, 2.2 percent behind June 2005.

“We saw very slow consumer spending in April, May and now certainly June,” said Ken Goldstein, economist at the Conference Board. “We’re going to continue to see it in July, August and September.”

Consumers are reining in spending because they’re concerned about their jobs, said Goldstein, who noted the economy added a “meager” 121,000 jobs last month.

“Pay increases haven’t really picked up, but prices have,” he said, “so they’re not only concerned about their jobs, but also their household budgets, which are starting to be squeezed.”

If consumers don’t start to feel more secure about their jobs or the state of the economy, retailers will face some tough going, Goldstein said.

“Unless something happens here, back-to-school’s not going to be a happy story for retailers, and that might be a prelude to what we’re going to see this coming holiday season,” he said.

The fates of retail and the overall economy have a significant link, since consumer spending makes up about two-thirds of the U.S. economy. Retailers also employ 23 million, or one in five American workers, according to the National Retail Federation, which also raised warning flags about spending.

“Consumers are beginning to pull back,” Rosalind Wells, the NRF’s chief economist, said in a statement. “Retailers can expect the second half to show moderate gains due to the slowdown in the housing market and other economic factors such as rising interest rates and higher gas prices.”