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

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 16,804.71 -238.19 -1.40%
Nasdaq 4,422.09 -71.30 -1.59%
S&P 500 1,946.16 -26.13 -1.32%
Treasuries 2.40 -0.10 -4.19%
Data as of 7:18pm ET
Company Price Change % Change
Bank of America Corp... 16.82 -0.23 -1.35%
Ford Motor Co 14.59 -0.20 -1.34%
Facebook Inc 76.55 -2.49 -3.15%
Apple Inc 99.18 -1.57 -1.56%
Cisco Systems Inc 25.03 -0.18 -0.72%
Data as of 4:03pm ET

Sections

In the last five years, pumpkin sales have risen 34% as people demand pumpkin in everything from beer to beef jerky. More

Facebook's chief product officer issued an apology to Sister Roma and the drag community on Wednesday for its flawed 'real name' policy. More

New York City launches a comprehensive site for all things related to its digital tech scene, Digital.NYC. More

For these seniors, the best retirement is not to retire. From a 102-year-old Wal-Mart worker to an activist park ranger, these workers have stayed on the job well into their golden years. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.