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US retail sales edge up just 0.2 pct. in June, a sign cautious consumers may restrain growth

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WASHINGTON - U.S. retail sales increased slightly in June, evidence that consumers remain cautious despite steady job gains this year.

Retail sales rose just 0.2 per cent last month, the Commerce Department said Tuesday, held back by a sharp drop at building and garden supply stores. Sales also fell at restaurants and at auto dealers.

The figures suggest that Americans are still reluctant to spend freely, limiting growth in the April-June quarter. While employers have stepped up hiring since January, wage growth remains weak and is barely keeping up with inflation. Retail sales are closely watched because consumer spending accounts for 70 per cent of the economy.

Still, economists were encouraged by some of the details in the report. A measure of retail sales that excludes volatile categories such as gasoline and autos rose at a solid 0.6 per cent clip. Clothing stores, sporting goods stores and department stores all recorded decent sales gains. And a category that includes online and catalogue retailers jumped 0.9 per cent in June and has increased 8.1 per cent in the past 12 months. That's nearly double the 4.3 per cent growth in overall retail sales in the past year.

"While the headline number for June was disappointing, there were some underlying pockets of strength," Jim Baird, chief investment officer for Plante Moran Financial Advisors, said. "The solid advance ... across numerous retail sectors suggests that consumers are spending, but doing so selectively."

Sales at auto and auto parts dealers fell 0.3 per cent, which contradicts strong data released by the automakers themselves earlier this month. The automakers had said sales reached an eight-year high in June. The two sets of data can sometimes conflict on a month-to-month basis.

Retail sales were revised higher in May to 0.5 per cent from 0.3 per cent, and in April to 0.6 per cent from 0.5 per cent.

Most analysts now expect the economy will expand at about a 3 per cent annual pace in the April-June quarter, a forecast that was little changed by the retail sales report. That's not as strong a rebound as many economists had hoped from a weak first quarter, when the economy shrank 2.9 per cent, largely because of cold weather.

Economists had expected second-quarter growth of 3.5 per cent rate a month ago, according to a survey by the National Association for Business Economics.

Several retailers have reported disappointing sales in the past month. Family Dollar, the Container Store and the Gap have all blamed falling sales on consumer caution. The CEO of the Container Store said the chain has been hurt by a "retail funk."

Yet some other stores reported healthy sales gains, including the discount club chain Costco and grocery chain Kroger's.

Purchases of large items like autos may be leaving many Americans with less money to spend on discretionary items like clothes and electronics. Rising grocery prices have likely also squeezed household budgets.

Still, employers are hiring at a healthy pace, which may give Americans more confidence to spend. Employers have added an average of 230,000 jobs a month in the first half of this year, up from 194,000 a month in 2013. That's knocked the unemployment rate down to 6.1 per cent, the lowest in nearly six years.

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Contact Chris Rugaber on Twitter at http://Twitter.com/ChrisRugaber/

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