Consumers put away their wallets in June to send retail sales crashing by the sharpest amount in nearly two years.
The Commerce Department reported day that retail sales fell by 0.9 per cent last month, the biggest drop since August 2005. Demand for autos, furniture and building supplies all plunged.
The drop was much bigger than the flat reading that economists had been expecting. It raised new worries about consumer spending, which is closely watched because it accounts for two-thirds of total economic activity.
The government report followed news yesterday of mixed results among the nation's big retail chains. While some stores fell below expectations, Wal-Mart Stores, the world's largest retailer, posted better-than-expected results, which sent the stock market surging on the hope consumers will offset a slumping housing market.
Economists believe that the economy is rebounding after a lacklustre start to the year. They are predicting that overall growth, as measured by GDP, will come in at a rate of 3 per cent or better in the just completed April-to-June quarter.