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Retail Sales Down As Americans Spend Less


Consumer prices in the US were unchanged in July as lower energy costs and falling demand kept a lid on consumer prices. A government report released Friday shows the Consumer Price Index dropping at the fastest rate in decades. It's a worrisome trend that reflects how far consumer confidence has declined.

According to the latest survey on consumer sentiment, recession-weary Americans did more browsing than shopping in July.

WOMAN: "I am more cautious with my shopping now than I have ever been. I have always been somebody who enjoys shopping, but I do think about it more than I did before."

Some shoppers say they're reluctant to open their wallets for much beyond the basics.

WOMAN2: "My situation is fine, but I am still aware that I could lose my job at anytime, and there's still no definite security. That's why I am paying attention more."

It's a new attitude for many Americans who once racked up credit card debt with very little hesitation. And it's a big concern for investors who worry that Americans are not be spending enough to help fuel an economic recovery.

Experts say consumer spending is a big deal because it accounts for two thirds of the U.S. economy.

Joe Brusuelas is the chief market analyst at Moody's Economy.com.

"Households are cautiously approaching their spending," he said. "No one is being confident in terms of expecting that their stream of income will continue through the next couple of years."

That insecurity was reflected on Wall Street where stock prices fell sharply.

The decline in retail sales came as a surprise to some, given the success of the government's "Cash For Clunkers" program, which has helped boost auto sales by two percent.

But some say the program, which gives consumers cash to trade in older vehicles for more fuel efficient models, may actually be hurting retailers.

Joseph Feldman is a retail analyst for the Telsey Advisory Group.

"I believe the Cash for Clunkers program is taking away from retail spending," he explained. "It's more at the higher end or more discretionary items. Big ticket things like flat screen TV's, I would think, are taking a hit."

The U.S. Labor Department report shows the spending slump has resulted in a two percent drop in consumer prices since last year. The economic news follows a series of reports that show foreclosures and jobless claims are rising.

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