Tepid retail sales lower expectations for US economic growth

WASHINGTON (AP) - A sluggish month of retail spending has tempered expectations for the U.S. economy's growth in the coming months.

Consumers pulled back on shopping and eating out in July after three straight solid monthly gains, the government said Friday. Those declines were offset by increases in auto sales and online and catalog sales.

Many economists credited the surge in online and catalog spending, which rose 1.3 percent, mainly to deals offered during Amazon's "Prime Day" on July 12. Amazon said its sales rose 60 percent on Prime Day compared with a year earlier.

Still, the flat reading for overall retail sales suggested the economy might not rebound as quickly from a slump that struck early this year as economists had been expecting. And a separate report Friday that U.S. producer prices last month registered their sharpest drop since September was a reminder inflation remains lower than the Federal Reserve wants it to be.

Combined, Friday's economic reports make it even less likely the Fed will raise interest rates before December. Few analysts expect any changes at the Fed's next meeting in September, and some foresee no rate hike before 2017.

July's retail sales figures "won't inspire much confidence in the economic momentum at this point," Michael Dolega, senior economist at TD Bank, said in a research note. "The poor showing makes any likelihood of a rate hike this year all the more distant."

Last month's flat reading for retail spending followed increases of 0.8 percent in June, 0.2 percent in May and a robust 1.2 percent increase in April. Some economists suggested it could mark merely a temporary dip after the solid readings through the spring.

"Given that employment has rebounded, consumer confidence is holding up, I'm not overly concerned," said Paul Ashworth, chief U.S. economist at Capital Economics.

The retail sales figure is measured in dollars, which means falling prices can reduce the figure even if consumer demand remains solid. Excluding gasoline, retail sales rose 0.2 percent last month.

Steady hiring and some evidence of rising pay have been boosting Americans' confidence and encouraging spending, which jumped 4.2 percent in the April-June quarter, the most in 18 months.