U.S. retail sales unexpectedly shrank in June as energy prices bit, raising concern about growth as the Federal Reserve considers halting its two-year interest rate hike campaign.

June retail sales fell 0.1 percent, marking the first decline since February, the Commerce Department said on Friday. This compared with Wall Street analyst forecasts for a 0.4 percent gain.

Bond prices initially edged higher and the dollar weakened on the data as investors trimmed the odds the U.S. central bank would lift borrowing costs again at its next meeting on August 8. Stock index futures fell on the data.

Consumers are feeling the pinch from rising energy prices and their spending moderated in the second quarter. This suggests that the economy is cooling off, said Gary Thayer, chief economist at A.G. Edwards and Sons in St. Louis.

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.

Meanwhile, 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.

This number is probably consistent with what the Federal Reserve forecast -- moderate growth in the second half. The focus now will shift to June inflation releases, said Lynn Reaser, chief economist at Bank of America Investment Strategies Group in Boston.

The Fed has raised rates in 17 consecutive quarter percentage point steps to 5.25 percent and has left the door open to either halting or keeping going in the months ahead, depending on the outlook for growth and inflation.

It got more goods news on the inflation front on Friday after Labor Department data showed that import prices rose just 0.1 percent last month, below expectations, as petroleum costs slipped for the first time in fourth months.

Excluding a 1.4 percent drop in the cost of petroleum imports, import prices rose 0.4 percent, partly reflecting a big jump in metals prices, the Labor Department said.

However, U.S. crude oil futures settled at a record $76.70 per barrel on Thursday and looked likely to head even higher on Friday on escalating violence in the Middle East.

While June's 0.1 percent gain in overall import prices came in below the 0.3 percent advance Wall Street economists had expected.

Retail sales Energy Inflation Retail