U.S. retail sales posted their biggest monthly decline in nearly two years during June, according to government data issued on Friday, indicating the housing market slump and soaring gasoline prices are depressing consumer spending.

Sales for June dropped 0.9 percent where economists had looked for a 0.1 percent gain, far outweighing small upward revisions to the figures for May, according to Commerce Department data.

There were also signs that inflation is creeping higher even as consumer demand weakens, with a Labor Department report showing import prices rising for a fifth straight month as petroleum costs soared.

Some of the pullback in retail was due to softer car sales, which dropped by 2.9 percent. Excluding autos, sales fell a more subdued 0.4 percent.

The data indicated that a downtrodden housing market and costlier gasoline were crimping consumers' ability sustain the spending boom that has kept the economy chugging along in recent years.

"The rise in gasoline prices absorbs a big chunk of spendable income," said Nigel Gault, director of U.S. economic research at Global Insight. "Consumers had to spend $53 billion more in the second quarter at an annual rate than they did in the first. Eventually they need to cut back somewhere else."

Energy costs were also boosting prices of imports, something that could worry the Federal Reserve and prevent it from cutting interest rates even as the economy slows. Import prices increased 1 percent in June, compounding the prior month's 0.7 percent rise.

U.S. economic growth nearly stalled in the first quarter, although analysts believe it rebounded in the second.

The question now is whether inklings of a revival in the industrial arena and bustling merger activity in the corporate sector are enough to keep the expansionary engine running on all cylinders.

U.S. Treasury bond prices rose following the retail figures, although the advance was curbed by fears surrounding imported inflation. Stock investors trimmed gains in the futures market following Wednesday's massive surge, which had taken the Dow to a new record.