Retail Sales Drop 0.1 Percent in June

Sales at U.S. retail stores unexpectedly shrank 0.1 percent in June, the first decline since February, pulled down by weaker sales of cars and building material, government data showed on Friday.

The Commerce Department said sales at gasoline stations climbed 1.1 percent following a 1.9 percent gain in May, as rising oil prices continued to inflate prices at the pump. Gas station sales were up 20.4 percent from June 2005. When gas sales were stripped away, retail sales fell 0.2 percent.

Wall Street analysts had expected a 0.4 percent rise in retail sales compared with a 0.1 percent increase in May.

Consumer spending accounts for about two-thirds of U.S. economic activity and analysts worry that higher energy prices, which act as a tax on household budgets, could crimp spending.

Weakening underlying retail sales might also persuade the Federal Reserve that growth was slowing enough to keep inflationary pressures in check as it considers halting a two year campaign of raising interest rates.

Retail sales excluding motor vehicles and parts advanced 0.3 percent compared with an upwardly revised 0.7 percent increase in May, previously reported as a 0.5 percent gain. Analysts had forecast an increase of 0.4 percent in June.

Sales of motor vehicles and parts dropped 1.4 percent and when cars, parts and gasoline were excluded, retail sales edged up by 0.1 percent.

Furniture and home stores sales rose 1.3 percent and were up 9.3 percent from a year ago. Sales at building materials and garden equipment stores were down 1.0 percent.