Consumer morale dips, worries over growth

Median expectations for inflation over a five-year horizon edged down to 2.8 percent in July from 2.9 percent in June.

Treasuries trimmed earlier price losses, with the benchmark 10-year note trading unchanged in price from late Thursday for a yield of 5.07 percent.

The dollar popped up to session highs despite the softer-than-expected confidence data. U.S. stocks extended their losses.

ECONOMIC SLOWDOWN ON THE CARDS?

"This number kind of justifies why the market's condition is so weak. The economic slowdown that is looked for in the second half of the year is well on its way to being a reality," said Barry Hyman, equity market strategist, EKN Financial Services Inc., New York.

The Commerce Department said sales at gasoline stations climbed 1.1 percent following a 1.9 percent gain in May, as rising oil prices continued to inflate prices at the pump. Gas station sales were up 20.4 percent from June 2005. When gas sales were stripped away, retail sales fell 0.2 percent.

Retail sales excluding motor vehicles and parts advanced 0.3 percent compared with an upwardly revised 0.7 percent increase in May, previously reported as a 0.5 percent gain. Analysts had forecast an increase of 0.4 percent in June.

Sales of motor vehicles and parts dropped 1.4 percent and when cars, parts and gasoline were excluded, retail sales edged up by 0.1 percent.

Consumer spending accounts for about two-thirds of U.S. economic activity and analysts worry that higher energy prices, which act as a tax on household budgets, could crimp spending.

Weakening retail sales might also persuade the Fed that growth was slowing enough to keep inflationary pressures in check.