Total retail sales increased 0.6% to $421.1 billion, ahead of the 0.4% increase that economists expected.
Excluding automobiles, gasoline and building materials from the mix, the so-called core retail sales increased 0.3% after a 0.2% rise in April. In its interpretation of the figures, the National Retail Federation (NRF) said May retail sales (excluding autos, gas stations and restaurants) increased 0.6% seasonally adjusted from April and increased “a strong 4.8% unadjusted year over year.
“Stronger employment data and increasing home and equity prices lifted confidence and spending this spring,” NRF Chief Economist Jack Kleinhenz said. “The economy is improving, albeit slowly, but we still have a long way to go. Stagnant salaries continue to constrain further economic acceleration. While sequester and tax increases dampened sales growth in the first quarter, it appears that the economy absorbed most of the blow.”
“The consumer seems to be faring very well,” said Brian Jones, senior U.S. economist in at Societe Generale, who correctly forecast the gain in sales. “The labor market is getting better. People realize that the employment situation has improved so they feel better and are probably willing to go out and spend money.”
Comparable store sales for May (excluding drug stores) rose 5.6%, according to Thomson Reuters, which had predicted only a 4.7% rise.
Clothing, Accessories Sales Falter However
“The 5.6% [same-store sales] result is the strongest showing since November 2012 when the index was 6.9%,” Thomson analyst Gregory Harrison wrote in a June 6 note. “Improved weather played an important part in boosting May retail numbers. Moreover, retailers benefited from improved mall traffic and sales promotions that drew more shoppers to spend.”
L Brands Inc.’s sales were up 3%. Gap Inc., the largest U.S. specialty apparel retailer, reported last week a 7% increase in May sales compared with the same month in 2012, almost double the 3.7% gain projected by analysts on average.
Economists said that the low interest rates held down by the Federal Reserve’s monetary stimulus have helped car sales in the face of higher taxes and limited income growth. Higher stocks and home prices are helping confidence and driving sales at many retailers.
In May, eight of the 13 major categories tracked by the Commerce Department showed gains, the biggest being in automobiles. One of the categories showing a decline was in clothing and clothing accessories stores’ sales which fell 0.2% seasonally-adjusted from April, yet increased 4.8% unadjusted compared to May 2012.
General merchandise stores’ sales increased 0.5% seasonally-adjusted month-to-month and increased 2.3% unadjusted year-over-year. Department store posted a 02% decline seasonally adjusted from April and a 3.9% decline compared to May 2012. Nonstore retailers, which include online sales, rose 0.7% from April and were up 11.3% compared to May of last year.
These figures are scrutinized especially by economists since consumer spending is the major engine of the U.S. economic growth and retail sales indicate how confident Americans are about the economy to increase spending. Over the last year, retail sales have risen a “solid but unspectacular” 4.3%.