Retail sales plunge in May

Retail sales dropped in May as consumers backed off spending, and that has sparked fears of the stability of an economic recovery.

The U.S. Commerce Department said retail sales plunged 1.2% last month -- the largest drop in eight months. Building and garden supply stores saw the largest drop in sales, followed by gas stations, car dealerships and clothing stores. Analysts had been predicting before the report's release that retail sales numbers would go up.

In an economic outlook speech to business leaders this morning, Philadelphia Federal Reserve President Charles I. Plosser said that continued high unemployment and labor market weakness has hampered income growth and restrained consumer purchases.

"While I believe the unemployment rate will gradually decline, it will take some time before it returns to a more acceptable level, he said in a statement. "Businesses must be comfortable with their prospects in the recovery before they start hiring in earnest."

U.S. stocks fell on the retail sales news as the economy remains uncertain, and that has investors jittery, says Marketwatch.