For the first time in eight months, retail sales fell 1.2% to $362.5 billion in May, the Commerce Department said. It was the first decline since September 2009, when retail sales fell 2.3%. Most economists expected sales to increase by approximately 0.2% in May. “The trend as of late has been modest growth, and around the trend of modest growth, you’re going to get some ups and downs,” said Scott Hoyt, a retail economist with Moody’s Economy.com. “That’s clearly what we’re seeing here.”
Building materials and supplies led the sales decline with a 9.3% drop, down significantly from the 6% increase in both March and April. “It was up so much [in March and April] partly related to the appliance incentives administrated by states that were mostly rolled out in March and April and part of it was probably pent up demand after winter weather,” Hoyt said. “But once you work off that pent up demand, you go back to a normal level.”
Gasoline station sales also fell significantly in May, dropping 3.3%. “This has to do with seasonality, since gas prices usually increase at this time of year but were flat or even down last month,” said Hoyt. “When there isn’t an increase in gas prices, this shows up in retail sales.”
The most surprising decrease is motor vehicle and parts sales dropping 1.7% in May, especially since automakers posted large May sales increases earlier this month.
“Excluding the weakness in these three areas — building supplies, gasoline stations and motor vehicles — overall sales would have increased 0.1% in May,” said Hoyt. This is on target to what most economists had predicted.
Total retail sales were up 6.9% over the same period last year.
“The pace of consumer spending growth we saw in the first quarter was too fast and couldn’t be sustained,” Hoyt said. “But if you put this [report] in the context of the last few months, where growth was quite strong, and smooth it all out a bit, we are still consistent with the story of modest spending growth, and this is where we should be.”