ForexSpace.com - Forex Traders saw U.S. markets fall in early trading after retail sales data out this morning showed the economic recovery to be faltering. The Dow, the S&P 500 and the Nasdaq have all opened lower at the top of the session. One of the key drivers of the sluggish start has been the country’s retail sales for May, which the Commerce Department show have disappointed for the second month running.

With unemployment standing at 8 percent and recent payrolls reports revealing limited gains, the limited potential for consumer spending to make any significant advances is causing concern amongst a number of analysts and top forex brokers alike. Ranvir Singh, CEO of the market analysts RANsquawk, told this site: "After last month's dire non-farm payrolls data, this is another serious blow to both the US and global economy. The steady tightening of consumers' purse strings bodes ill for both business and consumer confidence.

"The global economy needs a strong US. What it's getting is the opposite.”

Economist to lower growth forecasts?

The drop matched the expectations of 79 economists surveyed by Reuters and is considered to be a worrying indication of the nation’s health – consumer spending represent the largest part of the economy in the US at 70 percent). This latest report is now likely to lead economists to lower their outlooks for April-June economic growth.

Making predictions over the handling of the disappointing data by the American president, Singh went on to suggest that investors should be far more wary than Obama’s rhetoric suggests.  "While the Romney campaign will be silently dancing with glee at this data, President Obama will be ruing his uncharacteristically rash assertion last week that "the private sector is doing fine”, he said.

"It clearly isn't, and as the trickle of bad economic news turns into a stream, his re-election prospects risk being washed away."

The results yielded some positivity for the likes of Target Corp., with lower petrol prices helping out the beleaguered American spender to some extent. But overall, the data reveals one glaring truth:  “The consumer is pulling back,” said Michael Brown, an economist at Wells Fargo Securities LLC in Charlotte, North Carolina, who was amongst those analysts who correctly anticipated the drop. “There isn’t a lot of job creation. We will continue to see softer numbers.”

Hey, big purchase!

And while Americans cutback their spending habits in general, they did splash the cash on bigger purchases, the report found. Auto sales rose sharply, and sales of furniture and appliances also increased. That suggests consumers may already be seeing some benefit from lower gas prices and has lead other analysts to remain somewhat optimistic about the prospect of consumption moving forward.

"The continued fall in gasoline prices should support consumption by freeing up cash to be spent on other items," said Paul Dales (pictured), senior U.S. economist at Capital Economics. "So although real consumption growth looks set to slow in (the second quarter), we doubt it will grind to a complete halt."

Total retail sales fell in May to $404.6 billion. That's slightly below March's record level of $406.2 billion and 21.6 percent higher than the recession low hit in March 2009.

Sarah Cox, Markets Writer