May Sales Slip but Consumer Confidence Still Increases

Washington–Despite the U.S. Commerce Department’s report today that May retail sales dropped for the first time since September 2009, consumer confidence actually increased hitting its highest point since January 2008.

While the Commerce Department figures, showing retail sales dropped 1.2% in May, sent Wall Street and the stock market reeling into speculation that the economic recovery is weakening, The Reuters/University of Michigan index also released today showed U.S. consumer sentiment actually rose in early June to 75.5 up from 73.6 in May. A survey of economists had expected the sentiment index to hit 74 in June. The same index had hit a 30-year low of 55.3 in November 2008.

The apparent contradiction could be expanded by the fact American consumers are more attuned to prices at the pump than how blue chip stocks are faring in the stock market.

“Confidence does not seem to be largely affected by the recent negative developments in financial markets, oil spill crisis or the risks to the economic recovery from the European sovereign risk crisis,” wrote Yelena Shulyatyeva, an economist with BNP Paribas, in a research note. “Instead, lower gasoline prices appear to have boosted consumer optimism.” Indeed, sales at gasoline stations were down 3.3% in May reflecting in part lower gasoline prices for the month.

Noting that predictions all along had May sales slowing down compared to the first four months of the year, other market analysts say while today’s Commerce Department news may indicate a slowdown Wall Street may be overreacting.

June Sales May Be Better

Excluding auto sales, building materials and gasoline receipts, Brian S. Sozzi, research analyst at Wall Street Strategies says the retail sales figure was essentially flat in May. “Considering the Memorial Day holiday shift, these are numbers that we think were better than many were expecting,” he noted, adding that “we suspect that June’s result could be improved given the calendar shift, weather, Father’s Day and promotions (even more inclined in light of the inventory increases set for second-half 2010) designed to move volume ahead of back to school/back to college.”

Although the Commerce Department’s figure was the largest drop in monthly retail sales since the 2.2% drop last September, the April sales figures were revised upward 0.6% from the previously reported 0.4% increase. Furthermore, compared to May last year, sales were 6.9% higher.

Like this? Share it!

The Ad Will Close In 15 Seconds - Skip This Ad