WASHINGTON (AFP) – US retail sales slumped for the first time in eight months, the government said Friday, casting doubts on an economic recovery hinged on consumer spending.
Sales unexpectedly dipped 1.2 percent to 362.5 billion dollars in May from the previous month, according to data from the Commerce Department.
The data triggered fears that consumer spending, a key engine of growth, could slow recovery in the world’s largest economy from a brutal recession.
“Today?s report is both surprising and disappointing,” said Thomas Julien, US economist for Natixis.
The data came just two days after the central bank suggested sales would grow for the eighth month in a row in May, he said.
Federal Reserve chief Ben Bernanke also told lawmakers on Wednesday that consumer spending was likely to increase and would be a key cog in strengthening the US recovery.
The monthly retail sales report is a primary indicator of consumer spending, which accounts for two-thirds of US output.
Most economists had expected a 0.2 percent rise in retail sales in May following a revised 0.6 percent gain the previous month.
Sales in May dipped at building supply stores, reversing more than half of the surge in the previous two months, while many other segments posted big falls, including general merchandise stores, auto dealers, gasoline stations and apparel stores, according to the government data.
Non-store retailers and furniture stores were seen as bright spots.
Excluding autos, retail and food services sales fell 1.1 percent from the previous month, the Commerce Department said.
Despite the weak monthly retail data, sales were up nearly seven percent from their recessionary level of May 2009.
Growth was led by gasoline stations, nonstore retailers, and auto dealers, with only department stores among major segments posting sales below their year-ago level.
“Consumer sentiment is rising and the pace of the gain is good by the standards of past recessions,” said analyst Robert Brusca of FAO Economics.
“On balance the data on the day showed a weak spot in consumer spending in May. But it’s not lethal weakness. It still leaves momentum in consumer spending strong as we head into the second quarter,” he said.
Economists say consumer spending will be vital to a sustainable recovery as the government starts to wind down extraordinary stimulus measures that were aimed at jolting the economy, which plunged into recession in December 2007.
While the May data sprang a surprise, “it confirms the forecast for modest spending growth going forward more than threatens it,” said Scott Hoyt, senior director of consumer economics for Moody’s Economy.com.
He said sales grew “unsustainably fast” in the first quarter and that some of that was being reversed as spending settled into “a pace justified by modest job and income growth, low but growing wealth, deleveraging but reduced debt payments, and low confidence.”
US unemployment is near 10 percent, and last week the Labor Department reported weaker-than-expected job creation in May, also heightening fears of a faltering economic recovery.
The US economy is on track to grow 3.5 percent this year as it sees only a “modest” impact from the mounting eurozone debt crisis, Bernanke said this week.
Gross domestic product in the first quarter of 2010 rose 3.0 percent, according to the latest official data
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