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Commentary > The Hays Files
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Have we all stopped shopping?
May's retail sales figures were disappointing, but it's a bit early to declare the consumer dead.
June 13, 2002: 4:23 PM EDT
By Kathleen Hays, CNN/Money Contributing Columnist

NEW YORK (CNN/Money) - Retail sales -- did they just hit a pothole in May or are they really falling into the abyss?

Even before the release of today's report, economists were forecasting a weak number, though the actual decline of 0.9 percent was bigger than most were expecting. This weakness will no doubt frighten some market watchers, but I'm not one of them, at least not yet.

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First, unusually rainy weather is given a lot of the blame. That sounds like a bit of a lame excuse, but think about it. Who wants to buy a new swimsuit when it's 50 degrees and drizzling?

Another mitigating factor is a drop in gasoline prices that cut sales receipts at service stations. Remember, the government's retail sales figures aren't adjusted for price changes, so if something falls in price the dollar volume of sales will drop.

Auto sales fell in May, and they make up about 25 percent of total retail sales. But sales were super hot last fall when the auto companies gave buyers those irresistible "zero percent" financing deals. Some weakness in sales now can't be a surprise.

For what it's worth, the May tally of manufacturers' annualized vehicles sales to dealers was 15.7 million units. That was down from 17.4 million units in April and 17.0 million in March, and was a disappointment because something north of 16 million was expected. But bear in mind that even a 15-million unit pace remains reasonably healthy. In fact, Mark Vitner of Wachovia Securities is forecasting a selling rate this year of about 16.5 million, which would still be one of the strongest years on record.

Mark did an interesting calculation to get a look at the true underlying trend in retail sales. Overall retail sales, he notes, rose at a 2.9 percent annual rate over the past three months, and are up 3.3 percent over the past year. Then he removed motor vehicles and gasoline from the total and found out that sales were up at a 4.6 percent annual rate in the past three months and up 5.1 percent over past year. He says that pace is more consistent with the modest economic recovery the markets, and most economists, are expecting.

  graphic  RECENTLY BY KATHLEEN HAYS  
  
Summer shopping spurt?
Has the recovery begun?
June cheers for consumers?
  

Another reason many economists believe retail sales will keep growing at a moderate rate is the fact that the labor market continues to look a little healthier, as evidenced in weekly jobless claims now below 400,000 for two weeks in a row. This should support decent after-tax income growth, one of the biggest supports for spending.

Having said all that, the risk is that the labor market stops improving, stocks get even weaker, and people who are stretched to the limit with mortgage payments and credit card debt decide they have to go on a stricter budget. A lot of us got nice fat tax refunds early in the year that we already spent, and there's nothing like that on the horizon to give us another windfall.

So let's hope that the pick up in weekly chain store sales in the first week of June (which I wrote about earlier this week) IS a sign that warm weather also heated up our collective shopping engines, and we, the consumers of America, are going to keep buying. If we don't, the next double-dip recession we see could be our own.


Kathleen Hays co-anchors Money & Markets, airing Monday to Friday on CNNfn, and appears throughout the day reporting on the economy and how it affects financial markets. As part of CNN's Business News team, she is also a regular contributor to Lou Dobbs Moneyline.  Top of page






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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.