US retail sales slowed more than expected in June as American consumers cut back spending in the face of economic concerns and worries about the health of major banks, a government survey showed Tuesday.
The Commerce Department reported that retail sales, a vital driver of economic growth, rose a mild 0.1 percent last month. Most economists had predicted that sales would rise 0.4 percent.
Consumers put a brake on shopping trips to car dealers and malls after sales rose a revised 0.8 percent in May.
"Clearly, the domestic economy is on the ropes, with weak employment market conditions, declining home and equity prices, and surging gasoline prices inducing the consumer to pull back on major big-ticket purchases," said Brian Bethune, an economist at Global Insight.
The slowdown in sales could impact second-quarter economic growth, but economists said the report is unlikely to immediately change the Federal Reserve's stance on keeping interest rates steady.
Wall Street tracks retail sales closely because of the clues it gives on consumer spending which accounts for the lion's share of economic growth.
Overall sales were dragged down as car and truck sales dropped while consumers also cut back on purchases of electronics, home furnishings and garden equipment.
Core retail sales, which strip out auto sales, increased 0.8 percent last month, compared with a revised 1.2 percent spike in May.
The report suggested Americans have become more budget-conscious in recent weeks.
Consumers are being buffeted by a housing market slump, a credit crunch, rising gasoline prices and a falling stock market. Worries about the bank sector, following the weekend collapse of California-based IndyMac bank, are also jolting sentiment.
President George W. Bush said that he did not have a "magic wand" to lower gasoline prices, but said the world's biggest economy had "demonstrated remarkable resilience."
Federal Reserve chairman Ben Bernanke meanwhile told Congress that the central bank had cautiously raised its 2008 outlook for the economy, but cautioned that several risks -- including a possible spike in inflation -- remain.
The Fed has aggressively cut short-term US interest rates in a bid to shore up economic growth, but the central bank put its rate-cutting campaign on hold late last month as inflation worries mounted.
Its key base rate is presently pegged at 2.0 percent.
"This is a tough time right now and until we see some stability in the financial system, the volatility and uncertainty will continue," said Joel Naroff, chief economist of Naroff Economic Advisors.
The Commerce Department snapshot showed that retail activity rang up 384.2 billion dollars in sales during June.
The moderation in sales comes despite the Bush administration injecting a giant 168-billion-dollar stimulus into the economy which was stuffed with one-off tax rebates it hoped would fire up consumer spending.
Breaking down the report, vehicle and vehicle parts sales slumped 3.3 percent last month while furniture stores saw their sales tumble 1.4 percent.
Sales of garden equipment and building materials fell 0.9 percent, showing the housing slump is still roiling some retailers.
Electronics and appliance stores saw sales decline 0.6 percent. Restaurant and bar sales dropped 0.2 percent.
On the positive side of the ledger, food and beverage outlets saw their sales rise 0.7 percent while clothing stores recorded a 0.6 percent rise in turnover.
Gasoline sales increased 4.6 percent, but economists said this was mainly due to sharp price spikes.
Health care stores showed a healthy 0.6 uptick in turnover.
"We did buy more health care products, probably to relieve the headaches everyone is facing," Naroff quipped.
