US retail sales fall in May for second month, raising concerns

13 June 2012 18:46  [Source: ICIS news]

WASHINGTON (ICIS)--US retail sales, a key measure of consumer spending and sentiment, fell by 0.2% for the second month in a row in May from April , the Commerce Department said on Wednesday, and retail officials said that consumers seem to be taking a breather.

In its monthly report, the department said that retail sales last month were $404.6bn (€323.7bn), down by 0.2% from the April figure of $405.3bn.

April also saw a 0.2% decline, from the March figure of $406.2bn.

Consumer spending is a critical element of the US economy, accounting for as much as 70% of all commercial activity and production.

The two-month decline in retail sales followed what the National Retail Federation (NRF) called a surprisingly strong first quarter.

“It’s evident that consumers are simply taking a breath,” said NRF president Matthew Shay, noting that the retail industry is “the first to feel any backlash from consumers’ attitudes about the revival of the economy”.

NRF chief economist Jack Kleinhenz said the two-month downturn in retail sales suggests that “the economy thus far is working like an old machine with many fits, starts and even some sputtering”.

But both Kleinhenz and Shay were cautiously optimistic about near-term prospects for consumer spending.

“Consumers are benefiting from the slow but steady decline in gasoline prices, and we expect [retail sales] growth will resume and should pick up through the fall,” Kleinhenz said.

In the North American fall season, which usually begins at the end of the third quarter, US retail sales typically experience a strong upturn as families with children make purchases for the new school year beginning in September.

Shay said that retailers “are far from discouraged by May’s sales report” and are looking forward to the back-to-school sales cycle, usually the second-biggest retail period after the US Thanksgiving and Christmas holiday season of late November to late December.

However, some economists worry that the two-month decline in consumer spending, while marginal, suggests that households are getting more cautious and concerned about the viability of the still-sluggish US recovery.

The downturn in April and May retail sales follows a string of other reports that raised concerns about the recovery.

The Commerce Department said that US GDP growth eased to 1.9% in the first quarter, following a near-normal 3% GDP expansion in the fourth quarter of 2011.

In parallel with the April-May decline in retail sales, a measure of consumer confidence also saw downturns in the same two months.

The US unemployment rate inched up in May to 8.2%, and Federal Reserve Board chairman Ben Bernanke told Congress that he expects the jobless rate will stay high for the rest of this year as employers are worried about sales and the possible knock-on effects of the eurozone debt crisis.

Earlier this week, a survey of US small businesses reported that uncertainties about taxes, credit availability, growing healthcare expenses and regulatory compliance costs are discouraging owners from making capital expenditures or hiring more workers.

($1 = €0.80)

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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