Sales at retailers unexpectedly fell in May for the first time since September following a record slump in purchases of building materials, adding to fears the economic recovery was losing some steam.
The Commerce Department said total retail sales dropped 1.2%, the largest decline since September, after rising by an upwardly revised 0.6% in April. Sales in April were previously reported to have increased 0.4%.
Analysts polled by Reuters had forecast retail sales rising 0.2% last month.
Retail sales, which had risen for seven straight months, were up 6.9% compared to May last year.
U.S. Treasury debt prices rose. The U.S. dollar fell broadly.
The decline in sales follows a report last week showing private businesses unexpectedly held back on hiring in May after expanding payrolls for two months, a trend which could undermine recovery from the worst recession since the 1930s.
Restoring the economy to health is a key priority for President Barack Obama and voter anguish over the slow pace of the recovery could inflict heavy losses on the Democratic Party in November's Congressional elections.
Sales last month were dragged downed by a record 9.3% drop in receipts from building materials and garden equipment suppliers, which could reflect a drop in construction following the end of a popular homebuyer tax credit.
Motor vehicle and parts receipts also fell 1.7%, although dealers reported a rise in sales.
Excluding autos, sales fell 1.1% in May, the largest decline in 14 months, after rising 0.6% in April. Markets had expected sales excluding autos to gain 0.1%.
However, core retail sales -- which exclude autos, gasoline and building materials -- rose 0.1% after falling 0.2% in April. Core sales correspond most closely with the consumer spending component of the government's gross domestic product report.
Clothing and clothing accessories sales dropped 1.3%, while gasoline receipts fell 3.3%, the largest decline since March 2009.
There were a few bright spots in the report, with sales at sporting goods, hobby and book stores rising 0.4% in May after falling 1.3% in April.
Receipts at electronics and appliance stores increased 0.6%, reversing the prior month's fall.
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