WASHINGTON - Retail sales unexpectedly dropped at a seasonally adjusted 1.2% pace in May, contrary to economists’ estimates of an increase, and the first decline in eight months, the Commerce Department reported today.
Retail sales excluding autos and parts fell 1.1%, the largest decline since March 2009.
Economists polled by Thomson Reuters expected total retail sales to increase 0.2% and for sales excluding autos to increase 0.1%, according to the median estimate. Retail sales last declined in September when they fell 2.2%.
Sales in April were revised higher to a 0.6% increase from a 0.4% increase reported last month.
Sales excluding autos and gas stations fell 0.8% in May after increasing 0.6% in April. Sales excluding autos, gas and building materials increased 0.1% and declined 0.2% in April.
Sales at general merchandise stores sank 1.1%, the largest drop since December 2008.
Retail sales data “will continue to see a high degree of volatility,” said Kevin Schultze, a managing director and economist at Stone & Youngberg LLC, before the report.
Credit card borrowing remains constrained, he said. Revolving consumer credit, which includes credit card loans, has declined in 19 of the last 20 months through April, according to the Federal Reserve.
“Obviously, this is very worrisome,” Schultze said.
Consumers are saving more now than they were before the recession, he said. Incremental gains in average weekly earnings may not translate into greater retail sales as they have historically, he said. Average weekly earnings increased 2.8% year-over-year in May, the strongest gain in 19 months.
In the short term, the economy “needs to increase consumer spending,” Schultze said.
Retail sales for the year ending in May increased 6.9%, and excluding autos, sales increased 6.1% annually.
For the three months of March through May, retail sales increased 2.6% over the preceding three-month period.
