Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

Retail sales drop is first in 8 months

By Blake Ellis, CNNMoney.com


NEW YORK (CNNMoney.com) -- Retail sales fell for the first time in eight months in May, the government said Friday, widely missing analyst expectations.

Total retail sales fell 1.2% to $362.5 billion last month, compared with April's upwardly revised 0.6% increase, the Commerce Department said.

It was first decline since last September, when retail sales fell 2.3%. Economists surveyed by Briefing.com expected sales would increase by 0.2% in May.

Sales excluding autos and auto parts dropped 1.1% last month. Economists had projected sales excluding autos to edge up 0.1% 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."

Sales declines were led by a 9.3% drop in building material and supplies.

But because sales growth in this area was up more than 6% in both March and April, Hoyt said last month's correction was not surprising.

"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," he said. "But once you work off that pent up demand, you go back to a normal level."

Sales at gasoline stations 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."

Meanwhile, motor vehicle and parts sales dropped 1.7% in May. Hoyt said this was the most surprising part of May's report, since automakers such as Ford (F, Fortune 500) and General Motors posted large May sales increases earlier this month.

Excluding the weakness in these three areas -- building supplies, gasoline stations and motor vehicles -- Hoyt said overall sales would have increased 0.1% in May.

Total retail sales were up 6.9% over the same period last year.

Consumer spending accounts for two-thirds of U.S. economic activity, so related reports such as retail sales are closely watched to gauge whether a recovery is underway.

Despite May's disappointing data, Hoyt said that given the overall trend of growth this year, he expects retail sales to improve in the long run, just not as quickly as earlier this year.

"The pace of consumer spending growth we saw in the first quarter was too fast and couldn't be sustained," he 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." To top of page

Index Last Change % Change
Dow 18,432.24 -24.11 -0.13%
Nasdaq 5,162.13 7.15 0.14%
S&P 500 2,173.60 3.54 0.16%
Treasuries 1.46 -0.05 -3.51%
Data as of 10:42pm ET
Company Price Change % Change
KeyCorp 11.70 0.05 0.43%
Bank of America Corp... 14.49 -0.19 -1.29%
Ford Motor Co 12.66 -0.05 -0.39%
General Electric Co 31.14 -0.11 -0.35%
Chesapeake Energy Co... 5.42 0.23 4.43%
Data as of 4:04pm ET
Sponsors

Sections

For the first time ever, Amazon and Facebook are more valuable than Berkshire Hathaway, the storied company run by legendary investor Warren Buffett. More

Venezuela's government issues a decree recently that makes it possible to force workers to work in the country's fields amid food shortages. More

Sheryl Sandberg says she supports Hillary Clinton for president, because she would help close the gender gap, and because she's 'the most qualified candidate.' More

It's about to get harder for some luxury all-cash home buyers to hide their identity from the U.S. government. More