Weak U.S. retail sales hint at slower economic growth

WASHINGTON (Reuters) - U.S. retail sales unexpectedly fell in June as households cut back on purchases of automobiles and a range of other goods, which could raise concerns the economy was slowing again and temper expectations of a September rate hike.

The Commerce Department said on Tuesday retail sales slipped 0.3 percent, the weakest reading since February, after May's downwardly revised 1.0 percent increase.

Retail sales excluding automobiles, gasoline, building materials and food services dipped 0.1 percent following a 0.7 percent gain in May. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.

Coming on the heels of June's disappointing employment report and sharp drop in small business confidence, the weak retail sales data suggests the economy might have lost some momentum at the end of the second quarter, having struggled at the start of the year.

The economy contracted at a 0.2 percent annual rate in the first quarter and the drop in core retail sales could see economists trim their GDP growth estimates for the April-June quarter.

The soft data could cast doubts on an interest rate hike from the Federal Reserve this year, which most economist expect could come in September.

Fed Chair Janet Yellen said last Friday she expected the U.S. central bank to tighten monetary policy "at some point later this year." Yellen could offer more clues on the timing of the first interest rate increase since 2006 when she testifies before lawmakers on Wednesday and Thursday.

The dollar fell against the yen and the euro after the data, while prices for U.S. Treasury debt rose. U.S. stock index futures were little changed.

Economists polled by Reuters had forecast retail sales

rising 0.2 percent last month after a previously reported 1.2 percent jump in May. Core retail sales had been expected to increase 0.4 percent.

Retail sales last month were broadly weak, with receipts at auto dealerships falling 1.1 percent after rising 1.8 percent in May. Clothing stores sales dropped 1.5 percent, the largest decline since September 2014.

Receipts at building material and garden equipment stores fell 1.3 percent and sales at furniture stores declined 1.6 percent, the biggest drop since January last year.

There were also declines in sales at online stores and at restaurants and bars. Rising gasoline prices supported sales at service stations, where receipts rose 0.8 percent.

Sales at electronics and appliance stores rose 1.0 percent, the biggest rise since September.

A separate report from the Labor Department showed the lingering effects of a strong dollar continuing to suppress imported inflation pressures. Import prices dipped 0.1 percent in June after increasing 1.2 percent in May.

Import prices have now declined in 11 of the last 12 months.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)