U.S. retail sales slip 0.5%

U.S. retail sales fell in June for the second straight month, raising new concerns about how much of a slowdown the American economy will have to endure in the second half of this year.

The Commerce Department says retail spending dropped 0.5 per cent last month. That followed an even larger 1.1 per cent fall in May. Excluding autos, spending was down a smaller 0.1 per cent in June, as auto sales declined by 2.5 per cent during the month.

Much of the weakness last month came from the drop in auto sales and a decline in gasoline prices.

Excluding autos and gasoline, sales would have risen a slight 0.1 per cent in June after plunging one per cent in May.

Still, the lacklustre performance of retail sales over the past two months is prompting fears that the fledgling recovery is in danger of stalling out.

"The fact that this is the second straight setback is not sitting well with me," BMO economist Jennifer Lee said.

In addition to the general retail sales data, she noted that the MasterCard Advisor's Spending Pulse, a monthly spending survey also released Wednesday, tallied a decline in spending on luxury items in June, the first since November.

She was encouraged, however, by two areas of strength: consumer electronics, which was buoyed by the launch of Apple's iPhone 4, and a modest gain in clothing and accessories.

"U.S. consumer spending has stalled but it ain't over yet for this recovery," she said.