Shoppers Ring Up Better-Than-Expected Retail Sales in July

Consumers went shopping for clothes, furniture and electronics products last month, helping give a modest boost to retail sales despite continued weakness in the demand for new cars.

The Commerce Department reported Monday that retail sales edged up 0.3 percent in July after having plunged by 0.7 percent in June, the worst showing in 16 months.

Consumer spending, which accounts for two-thirds of total economic activity, is being watched carefully now. The fear is that the recent turmoil in financial markets combined with slumping home prices will make Americans more hesitant to spend in the months ahead, raising the threat of a possible recession.

Wall Street suffered through some stomach-churning days last week because of worries about how credit problems that began in the market for subprime mortgages might spread to other types of loans. The Federal Reserve and other central banks around the world sought to calm investor fears by injecting billions of dollars into the banking system in an effort to keep short-term interest rates from rising.

The 0.3 percent rise in overall retail sales last month was slightly better than the 0.2 percent gain that had been expected. It was driven by increased demand for electronics gear and appliances, furniture and clothing. These increases helped to offset a 0.3 percent slump in sales at auto dealerships which followed an even bigger 2.9 percent drop in June.