May sales spark doubt in recovery
By Martin Crutsinger |
June 12, 2010, Saturday
|
Print Edition
Print Edition
A BIG drop in May retail sales has raised new concerns about the durability of economic recovery in the United States.
Retail sales plunged 1.2 percent last month, US Commerce Department said yesterday. It was the largest decline in eight months.
Americans slashed spending on everything from cars to clothing to building materials. Auto sales fell 1.7 percent. Excluding autos, sales fell 1.1 percent.
Economists are worried that households will start trimming outlays as they continue to be battered by high unemployment and uncertainty in the stock market.
There's also concern that spending will freeze up as Americans see their wealth shrink. Investors have sold off stocks for more than a month because of concerns that Europe's sovereign debt crisis will slow a worldwide economic rebound. The Dow Jones industrial average fell 7.9 percent last month, the worst May for the blue chip index since 1940.
Some economists cautioned against overreacting to the gloomy May retail sales report because the numbers can be volatile from month to month. But they said if future months show weakness, then they will be forced to trim their estimates for overall economic growth in the second half of this year.
Analysts said the key will be employment and income growth in the months ahead.
"Our own view is that the labor market recovery will be a grudging one, that consumers will enjoy only modest gains in wages and salaries for some time and that consumer spending growth will therefore prove disappointing," said Joshua Shapiro, chief US economist at MFR Inc, an economic consulting firm in New York.
The decline in May retail sales was the largest since sales had fallen 2.2 percent in September. Analysts had been forecasting sales would be weak but remain in positive territory. The government did revise up slightly the April performance to show a gain of 0.6 percent for the month instead of the originally reported 0.4 percent increase.
Pulling down the overall number in May was a 9.3 percent plunge in building materials. That follows the expiration of a tax credit for home buyers in April that spurred home sales.
Department store sales fell 1.8 percent while sales in general merchandise stores, which includes retailers such as Wal-Mart, fell 1.1 percent.
Gasoline stations sales were down 3.3 percent, a drop that reflected in part lower gasoline pump prices during the month.
Economists say it may not be until 2012 or 2013, at best, before Americans' wealth returns to its pre-recession levels.
Retail sales plunged 1.2 percent last month, US Commerce Department said yesterday. It was the largest decline in eight months.
Americans slashed spending on everything from cars to clothing to building materials. Auto sales fell 1.7 percent. Excluding autos, sales fell 1.1 percent.
Economists are worried that households will start trimming outlays as they continue to be battered by high unemployment and uncertainty in the stock market.
There's also concern that spending will freeze up as Americans see their wealth shrink. Investors have sold off stocks for more than a month because of concerns that Europe's sovereign debt crisis will slow a worldwide economic rebound. The Dow Jones industrial average fell 7.9 percent last month, the worst May for the blue chip index since 1940.
Some economists cautioned against overreacting to the gloomy May retail sales report because the numbers can be volatile from month to month. But they said if future months show weakness, then they will be forced to trim their estimates for overall economic growth in the second half of this year.
Analysts said the key will be employment and income growth in the months ahead.
"Our own view is that the labor market recovery will be a grudging one, that consumers will enjoy only modest gains in wages and salaries for some time and that consumer spending growth will therefore prove disappointing," said Joshua Shapiro, chief US economist at MFR Inc, an economic consulting firm in New York.
The decline in May retail sales was the largest since sales had fallen 2.2 percent in September. Analysts had been forecasting sales would be weak but remain in positive territory. The government did revise up slightly the April performance to show a gain of 0.6 percent for the month instead of the originally reported 0.4 percent increase.
Pulling down the overall number in May was a 9.3 percent plunge in building materials. That follows the expiration of a tax credit for home buyers in April that spurred home sales.
Department store sales fell 1.8 percent while sales in general merchandise stores, which includes retailers such as Wal-Mart, fell 1.1 percent.
Gasoline stations sales were down 3.3 percent, a drop that reflected in part lower gasoline pump prices during the month.
Economists say it may not be until 2012 or 2013, at best, before Americans' wealth returns to its pre-recession levels.
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