Retail Sales Decline 0.2% in May

Retail sales in the U.S. fell in May for a second month as slower employment and subdued wage gains damped demand, a sign the world's largest economy is cooling.

The 0.2 percent decrease followed a similar decline in April that was previously reported as a gain, Commerce Department figures showed today in Washington. Last month's drop matched the median forecast of 79 economists surveyed by Bloomberg News. Sales excluding automobiles slumped by the most in two years.

Limited gains in payrolls and unemployment exceeding 8 percent signal it'll be tough for consumer spending, the biggest part of the economy, to accelerate from a first-quarter advance that was the biggest in a year. At the same time, lower prices at the gasoline pump are providing relief for Americans, helping sustain sales at retailers like Target Corp.

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"We can expect very modest growth in spending," Jonathan Basile, an economist at Credit Suisse in New York, said before the report. "The job market is grinding down to a slower pace. The outlook will continue to be soft."

Another report today showed wholesale prices dropped in May by the most since July 2009 as energy and food costs decreased. The producer price index declined 1 percent, more than forecast after falling 0.2 percent the prior month, Labor Department figures showed.

Stock-index futures held earlier losses after the reports. The contract on the Standard & Poor's 500 Index maturing in September fell 0.5 percent to 1,314 at 8:37 a.m. in New York.

Economists' estimates in the Bloomberg survey for retail sales ranged from a drop of 0.7 percent to a gain of 0.5 percent. April's reading was revised from a 0.1 percent increase.

Eight of 13 major categories showed declines last month, led by building materials retailers, service stations and general merchandise stores.

Sales at automobile dealers showed an unexpected gain, in contrast to industry figures, which are the ones used to calculate gross domestic product. They climbed 0.8 percent in May after a 0.1 percent increase the prior month.

Cars and light trucks sold at a 13.7 million annual rate in May, the weakest this year and down from April's 14.4 million pace, Ward's Automotive Group data showed. Year-over-year gains of 11 percent at General Motors Co. and 30 percent at Chrysler Group LLC trailed analysts' projections. Ford Motor Co., the only major automaker who topped estimates with a 13 percent increase in sales, boosted incentives by about $100 per vehicle.

Ex-Auto Sales

Retail sales excluding autos decreased 0.4 percent, the weakest performance since May 2010, today's report showed. They were projected to be unchanged, the survey median showed.

The retail sales data, which aren't adjusted for prices, reflected cheaper gasoline receipts at service stations, where receipts dropped 2.2 percent in May, the most this year.

A gallon of regular fuel at the pump cost an average $3.71 in May, down from this year's peak of $3.94 on April 4, according to AAA, the biggest U.S. auto group. It was down to $3.54 yesterday.

Spending increased 0.9 percent at clothing stores and 0.8 percent at electronics chains.

Less expensive gasoline may have helped free up cash for purchases of other items like clothing and home goods, company reports indicated. May same-store sales climbed more than analysts projected for Target, the second-largest U.S. discount chain, and Limited Brands Inc., the operator of the Victoria's Secret lingerie stores.

Excluding autos, gasoline and building materials, which are the figures used to calculate gross domestic product, sales were little changed in May after rising 0.1 percent, today's report showed. The April advance was previously reported at 0.4 percent.

Monthly employment gains have decelerated from a high this year of 275,000 in January. Payrolls rose 69,000 in May after a 77,000 increase in April, according to data from the Labor Department. The jobless rate climbed to 8.2 percent from 8.1 percent. Average hourly earnings rose 1.7 percent last month from May 2011, the smallest increase since December 2010.

Atlanta-based Home Depot Inc., the largest U.S. home-improvement retailer, is among companies projecting joblessness will remain stubbornly high.

"We will still face higher-than-normal unemployment and underemployment rates, with the consequence that value will remain of major importance to our customers," Chief Executive Officer Frank Blake said on an analyst conference on June 6. "Growth will be moderate."

Gasoline Savings

At the same time, the drop in fuel costs is helping to shore up Americans' finances and improve the buying climate, lifting confidence. The Bloomberg Consumer Comfort Index to rise for the third consecutive week, figures showed on June 7.

Today's report, including the downward revisions to prior months, may prompt some economists to trim forecasts. Household purchases will grow at 2.3 percent annual rates in each of the final three quarters of 2012, according to the median estimate in a separate Bloomberg survey of economists taken from June 1 to June 5. Consumer spending expanded at a 2.7 percent pace last quarter.

Bloomberg News