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Retail sales fall in May
Government report shows weaker-than-expected activity; sales excluding autos also lower.
June 14, 2005: 9:06 AM EDT

NEW YORK (CNN/Money) - A government report Tuesday on retail sales showed a larger-than-expected drop in May, primarily on the back of weakness in auto sales.

The Department of Commerce report said overall sales fell 0.5 percent last month, compared to a revised 1.5 percent increase in the prior month. Retail sales were initially reported to have risen 1.4 percent last month.

Economists surveyed by Briefing.com had forecast retail sales to slip 0.2 percent.

Excluding auto sales, retail sales fell 0.2 percent versus expectations for a 0.2 percent increase. Ex-auto sales were revised up 1.4 percent in April versus an initial reading of a 1.1 percent increase.

Auto sales fell 1.6 percent last month compared to a strong 2.0 percent increase in April. Sales at gasoline sales also fell 1.6 percent in May compared to a 2.2 increase the prior month.

Industry observers said the May softness wasn't entirely surprising given that auto sales sputtered in May after a strong showing in the prior month. Auto sales account for about a quarter of total retail sales.

"That was the dominant story in May," said Michael Niemira, chief economist and director of research with the International Council of Shopping Centers (ICSC). "But you have to put the numbers in context, especially with April having been so strong."

The other factors that negatively hurt retailers last month included unfavorable weather, Niemira said, especially with the colder-than-normal temperatures slowing sales of seasonal apparel.

"June is likely to see a pick-up in seasonal merchandise like air conditioners and summer clothes because of the warmer weather," he said. "So look for sales to rebound."

Among other categories that took a hit last month: clothing sales fell 0.8 percent, department store sales fell 0.9 percent and purchases of consumer electronics slipped 0.1 percent.

However, building materials sales rose 0.5 percent, furniture sales increased 0.4 percent and sales of health and personal care products grew 0.8 percent.

"While weather played a role in soft apparel sales, the high energy prices impacted overall sales," said Anthony Chan, senior economist with J.P. Morgan Asset Management. "Net-net, the climate is likely to get better with improvements in the labor market."  Top of page

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