Aside from Autos, Retail Sales Slide 0.1%

Retail sales outside of autos turned in a disappointing performance in July, underscoring concerns about the timing and durability of a recovery from the worst recession since World War II.

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 was the first setback following two months of modest sales gains. Excluding autos, sales fell 0.6 percent, worse than the 0.1 percent rise economists had forecast.

Gas station sales plunged 2.1 percent, due more to falling pump prices than weak demand. Excluding the drop at gas stations, retail sales would have posted a modest 0.1 percent increase.

Department store sales fell 1.6 percent and the broader category of general merchandise stores, which includes big chains such as Wal-Mart Stores Inc. and Target Corp., posted a decline of 0.8 percent.

The July weakness highlighted worries about the potential strength of the recovery from the recession. Economists are worried that consumers could remain hunkered down which would make any recovery exceptionally weak since consumer spending accounts for about 70 percent of total economic activity.

The disappointing retail sales report followed news last week of continuing troubles at the nation's big chain stores that raised worries about the strength of the back-to-school sales.

According to the retailers' reports, mall-based apparel stores fared the worst in July. Macy's Inc. and teen retailers Abercrombie & Fitch Co. and Wet Seal Inc. reported disappointing results.

The Commerce report, however, indicated that specialty clothing and accessory stores posted a 0.6 percent gain in July, one of the few bright spots in the government report.

Meanwhile, the number of newly laid-off workers filing claims for unemployment benefits rose unexpectedly last week, while continuing claims fell sharply.

The Labor Department says new 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.

However, the number of people remaining on the benefit rolls fell to 6.2 million from 6.34 million the previous week. Analysts had expected a slight decline.

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