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WASHINGTON (AP) — A big drop in May retail sales has raised new concerns about the durability of the economic recovery.
Retail sales plunged 1.2 percent last month, the Commerce Department said Friday. It was the largest decline in eight months.
Americans slashed spending on everything from cars to clothing to building materials. Auto sales fell 1.7 percent. Excluding autos, sales fell 1.1 percent.
Economists are concerned that households will start trimming outlays as they continued to be battered by high unemployment and a swoon in stock prices. Consumer spending accounts for 70 percent of total economic activity.
There's also concern that spending will freeze up as Americans see their wealth shrink. Investors have sold off stocks for more than a month because of concerns that Europe's sovereign debt crisis will slow a worldwide economic rebound. The Dow Jones industrial average fell 7.9 percent last month, the worst May for the blue chip index since 1940.
Some economists cautioned against overreacting to the gloomy May retail sales report because the numbers can be volatile from month to month. But they said if future months show weakness, then they will be forced to trim their estimates for overall economic growth in the second half of this year.
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