Retail Sales Dip Unexpectedly, Jobless Claims Rise

WASHINGTON (AP) -- Retail sales disappointed in July and the number of newly laid-off workers filing claims for unemployment benefits rose unexpectedly last week. The latest government reports reinforced concerns about how quickly consumers will be able to contribute to a broad economic recovery.

"There is really no positive spin to put on these numbers," Jennifer Lee, an economist with BMO Capital Markets, wrote in a research note. "The U.S. consumer remains very weak. The jobs situation, while slowly improving, is still dismal."

The Commerce Department said Thursday that retail sales fell 0.1 percent last month. Economists had expected a gain of 0.7 percent.

While autos, helped by the start of the Cash for Clunkers program, showed a 2.4 percent jump -- the biggest in six months -- there was widespread weakness elsewhere. Gasoline stations, department stores, electronics outlets and furniture stores all reported declines.

The July dip in U.S. retail sales was the first setback following two months of modest gains. Excluding autos, sales fell 0.6 percent, worse than the 0.1 percent rise economists had forecast. And excluding both auto and gas purchases, retail sales fell 0.4 percent -- the fifth straight monthly decline.

The Labor Department said initial claims increased to a seasonally adjusted 558,000, from 554,000 the previous week. Analysts expected new claims to drop to 545,000, according to Thomson Reuters.

The four-week average of initial claims, which smooths out fluctuations, rose by 8,500 to 565,000. That reverses six straight weeks of decline.

Wal-Mart on Thursday reported virtually flat second-quarter income compared with a year ago, but the results beat Wall Street expectations and the world's largest retailer raised the low end of its profit outlook as a series of cost-cutting moves draw frugal shoppers away from rivals.

Still, the July weakness in overall retail sales highlighted worries about the potential strength of the recovery from the recession. Consumer spending accounts for about 70 percent of total economic activity.

"Households are in no position to drive a decent economic recovery," Paul Dales, U.S. economist at Capital Economics, wrote in a note to clients.

While there have been recent signs of stability in the U.S. housing market after three years of plunging prices, record foreclosures persist. The number of U.S. households on the verge of losing their homes rose 7 percent in July, as the foreclosure crisis continued to outpace government efforts to limit the damage.

Foreclosure filings rose 32 percent from the same month last year, RealtyTrac Inc. said Thursday. More than 360,000 households, or one in every 355 homes, received a foreclosure-related notice. That's the highest monthly level since the foreclosure-listing firm began publishing the data more than four years ago.

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