Chart of retail sales, June 2012, via Calculated Risk

Chart of retail sales, June 2012, via Calculated Risk

Retail sales fell for the third straight month in June, a rare event that usually happens during recessions. With 70% of the US economy coming from consumer spending, it’s almost axiomatic that slower retail sales correlates with economic contraction.  Chart is from Calculated Risk.

U.S. retail sales fell for a third straight month in June as demand slumped for everything from cars and electronics to building materials, a sign the economic recovery is flagging.

Retail sales slipped 0.5 percent, the Commerce Department said on Monday.

It was the first time sales had dropped in three consecutive months since late 2008, when the economy was still mired in a deep recession. Analysts polled by Reuters had expected retail sales to rise 0.2 percent.

As Doug Henwood points out, this almost always happens during a recession.

Analysts gave different takes on the drop in retail sales, from fears over the European debt crisis (Americans are going to restaurants less because of Spanish borrowing costs?) to lackluster hiring to lower gas prices from higher supply (that accounts for only a portion of it) to a general uncertainty about the economic outlook. Whatever the reason, the sales slowdown pretty much explains itself as far as the economy is concerned. Slow sales will lead to slow hiring which will lead to slow economic growth. You cannot really disassociate one from the other.

As Calculated Risk shows in a graph, year-over-year retail sales remain well above the crater from the recession, but they are trending fairly sharply downward, currently around the level from mid-2010. With fiscal policy hopelessly clogged and monetary policy unwilling – and some say unable – to make a difference, it’s hard to see the US economy as in control of its own circumstances, rather than captured by global events.