Retail sales drop again in May, report says

There’s more bad news for the economy: Americans spent less at retail shops in the past month, according to figures released Wednesday by the Commerce Department.

It was the second decrease in a row for the monthly retail trade numbers. Sales dropped to $404.6 billion in May, a decrease of 0.2 percent from April, the department’s report said. The last time a drop occurred for two consecutive months was in 2010.

Falling gas prices over the past four months should have meant more money for consumers to spend, retail industry economists said. Gas prices have decreased by 3 percent since February.

But consumer confidence was dented by a disappointing employment report from the federal government in early May, they said. The latest jobs data, released early this month, provided more discouraging news about the country’s job growth.

“Today’s news is not good news,” said Brian Dodge, spokesman for the Retail Industry Leaders Association, a trade association of major U.S. retailers. The decrease in spending showed that consumers were being cautious in times of slow economic growth, he said.


Retail sales are down. (The Washington Post/Source: Census Bureau)

Although overall sales were down, spending on big purchases such as furniture, automobiles and electronics were up, according to the retail report. Grocery stores and building-material sectors saw slight drops.

But there is plenty of time left in the year for spending, economists said. Job growth and gas prices are the essential factors that will affect how much Americans spend in the coming months, said Mitchel Schlesinger, chief investment officer at FBB Capital Partners in Bethesda.

Retail sales in the first quarter of the year were unusually strong and the latest decline might be just a lull, reflecting the decision by many consumers to make their purchases earlier in the year, said Jack Kleinhenz, chief economist at the National Retail Federation, another trade association.

“We have seen a very resilient consumer these last couple of years,” Kleinhenz said. “I’m not ready to write them off at this point.”

Retail sales were at $404.7 billion for February and $406.2 billion for March. The confidence of consumers and their willingness to spend money was on the rise earlier this year because of encouraging reports on employment during the winter, economists said.

Gary Goddey, manager of the home-goods store Trohv in Baltimore, said there had been no drastic change in sales there over the past few months. “I don’t feel like there’s been an increase,” he said. “We’ve been holding steady.”

The producer price index , a separate indicator released by the Labor Department on Wednesday, fell by 1 percent in May. A major cause of the decline was wholesale gas prices, which dropped by 9 percent. The index measures changes in prices of goods before they are sold to consumers.

Stocks dropped marginally in response to the retail report and continuing concerns about the debt crisis in Europe. The Dow Jones industrial average closed down by 0.6 percent, while the Standard & Poor’s 500-stock index closed down by 0.7 percent.

Amrita Jayakumar covers federal government contracting for Capital Business, The Post's local business publication.
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