Retail sales slither in May

The fall is the biggest in the last eight months, suggests the data in the monthly report released Friday by the Commerce Department.

Sales in the comparative period last year had risen by 6.9 percent.

"Until the overall economic news improves and those Americans out of work find employment, meaningful retail sales growth will be difficult to achieve," opined Kennedy.

Not yet out of the woods
The sales numbers for the month of May "dramatically weakens the outlook for consumption growth in the second quarter and is a reminder that households are not going to be the engine of growth for some time," said Paul Dales of Capital Economics in a research note.

Since consumer spending accounts for substantial proportion, approximately 70 percent, of economic activity, listless buying patterns suggest that a turnaround may still be distant.

"Retailers have long recognized that it may be a long uphill climb to full recovery, but [Friday's] report suggests the climb may be steeper than we thought," said Sandy Kennedy, president of the Retail Industry Leaders Assn.

"Until the overall economic news improves and those Americans out of work find employment, meaningful retail sales growth will be difficult to achieve," opined Kennedy.

Category wise performance
Sales dipped in a broad array of categories. Auto sales dropped 1.7 percent last month, hardware store sales fell drastically by 9.3 percent, department store sales registered 1.8 percent drop while general merchandise sales reported a 1.1 percent dip over last month.

The winding down of government rebates to encourage sales of energy-efficient products was reflected in fall in home improvement sales.

Gasoline station sales reported a fall of 3.3 percent in May. Demand at clothing and general merchandise stores also fell.

“Comparable-store sales were somewhat below our expectation. Our recent experience reinforces our belief that we will continue to experience volatility in the pace of economic recovery,” noted Gregg Steinhafel, chief executive officer of Target.

One sector that visibly bucked the trend of dip in sales was the non store retailers with a healthy 15.6 percent jump in sales over last year.

Low hiring
The Labor Department reported, released last week, revealed that only 41,000 workers were added to payrolls in May, the fewest in four months.

“It’s unreasonable to expect rapid spending growth in this environment. Businesses are being cautious about hiring. We have a huge amount of ground to cover to make up for the jobs lost during the recession,” noted Zach Pandl, an economist at Nomura Securities International Inc. in New York.

Economists predict a 3 percent jump in purchases this quarter and 2.6 percent rise in the latter half of the year.

Meanwhile the Thomson Reuters/University of Michigan preliminary index of consumer sentiment rose to 75.5, the highest since January 2008. The index was 73.6 in May this year.