With automobile sales particularly weak, total May retail sales fell 0.2% following a 0.3% increase in April. The decline, the first in a year, was actually less than economists’ average forecast which expected a decline of 0.4% (and 0.3% decline excluding automobiles).
Lower Gas Prices Ahead May Help
Disruptions in car production pushed auto sales down 2.9%–the largest decline since February 2010–and depressed overall retail sales.
But “core retail sales”–which exclude autos, gasoline and building materials–rose 0.2% in May after rising 0.3% in April. Economist said core sales correspond most closely with the consumer spending component of the government’s gross domestic product report, which rose at a 2.2% annual pace in the first quarter.
Sales of apparel and accessories rose 0.2% in May on top of a 0.1% increase in April.
While rising gasoline prices has been attributed to a flattening out in retail sales over the last few months, economists said that gasoline prices are edging downward. Receipts at gasoline stations rose 0.3% in May, the weakest rise since June. Gasoline prices have dropped to about $3.78 a gallon from more than $4 a gallon in early May.
“Consumers are not panicking. We should begin to emerge from the soft patch in the second half of the year, a lot of the drags on the recovery are fading,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester Pennsylvania.
“We are still looking at a month when gas was expensive. Now that gas has come down, people will have more money in their pockets,” said Bill Cheney, chief economist at John Hancock Financial Services.
“This decline in retail sales doesn’t indicate we’re in for a double dip recession–yet,” said David Indiviglio of The Atlantic. “But if sales continue to fall, and by greater and greater margins, then we should start to worry. A few months of declining sales could just be a readjustment to rising prices. But if consumer pessimism catches on and intensifies, then firms may halt the little hiring they’re doing and layoffs could begin again.”