US retail sales fall unexpectedly despite cash-for-clunkers offer

Fall in sales indicate recovery may be more unsteady than feared

In a disappointment for the Obama administration's efforts to push the US economy back to recovery, the $3bn (£1.8bn) "cash-for-clunkers" scheme appears to have stimulated retail sales far less than expected.

Auto sales only rose by 2.4 per cent in July, as American consumers still nervous about jobs and, in many cases, unable to find the finance for their new cars, left the scheme unexploited, though it has been popular and the initial $1bn ran out last month, Congress having approved an emergency top up of $2bn.

What was still more damaging for the future prospects of the US economy was that sales at US shops, malls and other retail channels fell unexpectedly last month, and by so much that the small positive effect of the US car scrappage scheme was more than cancelled out. An overall 0.1 per cent decline in sales, the first fall in three months, reinforced fears that the US recovery may be more unsteady than hoped. The US Federal Reserve said earlier this week that the US economy had "flattened out", a view undermined by the latest news. Retail Purchases excluding cars fell by 0.6 per cent on the month, again by more than forecasts. Consumption comprises around 70 per cent to of the US economy – and is around 16 per cent of the global economy.

Paul Dales, of Capital Economics, commented: "There is no upward momentum in sales at all and suggests that falling employment, slowing wage growth and limited access to credit are taking their toll on spending. Overall, the retail sales data support our view that households are in no position to drive a decent economic recovery."

Consumer spending, which accounts for 70 per cent of the economy, is projected to grow at an average 1.6 per cent pace through the first half of 2010, ending its worst slump since 1980, according to a poll of economists by Bloomberg. Purchases rose at an average 3.5 percent pace in the decade before the current recession began in December 2007.

If joblessness is holding back consumer spending, then the US Labor Department had further bad news yesterday. Delivering the weekly jobless claims figures, officials said that 558,000 people filed first-time claims for jobless benefits last week, up from 554,000 the week before. The American economy has shed almost 7 million jobs in the recession.

Yet a further significant drag on the US economy does show signs of drawing to close. The savage destocking that has decimated order books seems set to end soon, with the tenth successive monthly drop in inventories reported yesterday, a 1.1 per cent drop on sales that the value of stockpiles down to $1.35 trillion, the lowest level in three years. Observers hope that it may not take much longer to bring sales and stock levels back into equilibrium, prompting a revival in orders.

Earlier this week the Federal Reserve Open Markets Committee said that they would maintain their benchmark rate at an "exceptionally low" level for an "extended period" to help foster a recovery.

Start your day with The Independent, sign up for daily news emails
News
One father who couldn't get One Direction tickets for his daughters phoned in a fake bomb threat and served eight months in a federal prison
people... (and one very unlucky giraffe)
Sport
sportSo, how closely were you paying attention during 2014?
Arts and Entertainment
Dennis speaks to his French teacher
tvThe Boy in the Dress, TV review
Arts and Entertainment
Joel Edgerton, John Turturro and Christian Bale in Exodus: Gods and Kings
film
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

Selby Jennings: Quantitative Research | Equity | New York

Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

Selby Jennings: SVP Model Validation

Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

Day In a Page

Aren’t you glad you didn’t say that? The worst wince-and-look-away quotes of the year

Aren’t you glad you didn’t say that?

The worst wince-and-look-away quotes of the year
Hollande's vanity project is on a high-speed track to the middle of nowhere

Vanity project on a high-speed track to nowhere

France’s TGV network has become mired in controversy
Sports Quiz of the Year

Sports Quiz of the Year

So, how closely were you paying attention during 2014?
Alexander Armstrong on insulting Mary Berry, his love of 'Bargain Hunt', and life as a llama farmer

Alexander Armstrong on insulting Mary Berry and his love of 'Bargain Hunt'

From Armstrong and Miller to Pointless
Sanchez helps Gunners hold on after Giroud's moment of madness

Sanchez helps Gunners hold on

Olivier Giroud's moment of madness nearly costs them
A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

Christmas without hope

Gaza fears grow that conflict with Israel will soon reignite
After 150 years, you can finally visit the grisliest museum in the country

The 'Black Museum'

After 150 years, you can finally visit Britain's grisliest museum
No ho-ho-hos with Nick Frost's badass Santa

No ho-ho-hos with Nick Frost's badass Santa

Doctor Who Christmas Special TV review
Chilly Christmas: Swimmers take festive dip for charity

Chilly Christmas

Swimmers dive into freezing British waters for charity
Veterans' hostel 'overwhelmed by kindness' for festive dinner

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect