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

Just the hot list include
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 32,627.97 -234.33 -0.71%
Nasdaq 13,215.24 99.07 0.76%
S&P 500 3,913.10 -2.36 -0.06%
Treasuries 1.73 0.00 0.12%
Data as of 6:29am ET
Company Price Change % Change
Ford Motor Co 8.29 0.05 0.61%
Advanced Micro Devic... 54.59 0.70 1.30%
Cisco Systems Inc 47.49 -2.44 -4.89%
General Electric Co 13.00 -0.16 -1.22%
Kraft Heinz Co 27.84 -2.20 -7.32%
Data as of 2:44pm ET
Sponsors

Sections

Bankrupt toy retailer tells bankruptcy court it is looking at possibly reviving the Toys 'R' Us and Babies 'R' Us brands. More

Land O'Lakes CEO Beth Ford charts her career path, from her first job to becoming the first openly gay CEO at a Fortune 500 company in an interview with CNN's Boss Files. More

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.