By  on August 13, 2010

WASHINGTON — Two government reports released Friday highlighted how far the economy still has to travel to full recovery, but offered signs the outlook is improving compared with last year.

The U.S. Commerce Department said retail apparel sales fell in July compared with a month earlier, but specialty store and general merchandise store sales improved over last year. The Labor Department reported apparel prices were higher in July compared with a month earlier, but declined year-to-year, tamping down inflation fears.

Clothing and accessories store sales dipped 0.7 percent in July to $18 billion compared with June, and department store sales fell 1 percent to $15.4 billion, the Commerce Department said. Sales at general merchandise stores, a category that includes discount and department stores, dropped 0.2 percent to $50.3 billion for the month.

In yearly comparisons, specialty store sales advanced 3.8 percent, while department store receipts fell 0.8 percent. General merchandise stores saw sales increase 2.4 percent.

“Household spending remains tepid amid concerns about economic stability,” said Jack Kleinhenz, chief economist for the National Retail Federation. “Current data on the economy is mixed, which signals that retailers will continue planning with caution until a long-term trend can be established.”

July results were not alarming, said Kevin Regan, senior managing director and retail industry expert with FTI Consulting, but showed the depth of consumer reluctance to start spending again in the face of daily reminders that unemployment remains high and foreclosures still loom over many homeowners. Sales comparisons to July 2009 were easy, he pointed out, tempering the year-over-year boost reported in some categories, but there were still pockets of strength.

Strong sale results this spring gave rise to muted optimism, “but that momentum is clearly lost,” said Regan, adding the last few months have brought the retail environment “back to earth.”

In the overall economy, the sales gain was slightly less than expected at 0.4 percent in July compared with June to $362.7 billion, and advanced 5.5 percent year-over-year.

Meanwhile, retail apparel prices rose a seasonally adjusted 0.6 in July compared with a month earlier, but declined 0.3 percent in 12-month comparisons, the Labor Department said Friday in its Consumer Price Index.

Charles McMillion, president and chief economist with MBG Information Services, said it’s unusual for apparel prices to rise while retail receipts are down.

“This makes perfect sense for consumers, but I just don’t understand retailers,” McMillion said, pointing out that, with shoppers focused on deals, any price increases could scare them away and drive sales down.

Prices for women’s apparel rose 1.6 percent in month-to-month comparisons, but fell 0.3 percent compared with July 2009. Men’s apparel prices dipped 0.3 percent in July, but were up 1.1 percent from a year earlier.

The overall CPI rose 0.3 percent in July compared with June, in line with expectations, and advanced 1.2 percent from a year earlier. The so-called “core index,” which excludes the volatile food and energy sectors, inched up 0.1 percent in July and advanced 0.9 percent year-over-year.

“The July report on core consumer prices yet again points in the same direction — in competitive markets for goods and services there are absolutely no signs of any inflation pressure,” said Brian Bethune, chief U.S. financial economist with IHS Global Insight.

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