US retail sales stall

Data released by the US Commerce Department has given global markets cause for concern, revealing that retail sales for the country had slowed down in the month of June.

Although a gain of 0.4% for the month was realised in retail and food services sales, analysts had expected a gain of 0.7% to complement May’s 0.5% increase. Meanwhile, retail sales remained flat when sales of motor vehicles and parts were excluded from the reading.

Ryan Sweet, an analyst for Moody’s Analytics, said, “June retail sales puts spending on a weaker trajectory heading into the third quarter. This is troubling, as the consumer has been shouldering the recovery this year.” Furthermore, the fact that the slight growth recognised had been driven by auto sales reflected even less confidence in the general economy, as these sales are normally only occasional purchases.

Other key statistics included on the report showed that spending at restaurants and bars had fallen by 1.2% to add to May’s fall in the same sector, whilst grocery store sales also decreased as consumers set aside more money for climbing petrol prices.

As confidence around the globe remains subdued (with China’s future growth potential still on investors’ minds, as well as the US Federal Reserve hinting at tapering off its bond buying program), consumer confidence in Australia could also begin to diminish in the near future. If this eventuated, companies like Myer (ASX: MYR) or Harvey Norman (ASX: HVN) could be affected for the short to medium terms.

When retailers are affected, shopping centre group Westfield (ASX: WDC) could also fall in value, due to its reliance on retailers for revenues from rent. However, investors need to realise that short-term setbacks for quality companies can present as excellent buying opportunities.

Foolish takeaway

Despite the disappointing data, retail sales for the US are still up by 5.7% since June 2012, whilst the April-June quarter as a whole also reflected better market conditions than the same period last year, with sales up by 4.6%.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.

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