Retail sales rose less than forecast in May as American consumers took a respite following a three-month surge in shopping that has underpinned economic growth.
The 0.3% increase in purchases last month followed a revised 0.5% gain in April that was much larger than previously estimated, Commerce Department figures showed today in Washington. The median forecast of 83 economists surveyed by Bloomberg called for a 0.6% advance. May marked the fourth consecutive gain in sales.
Consumers are increasing spending as a healing job market and rising home values boost balance sheets. Higher May sales from auto lots to Lowe’s Cos. signal vitality in household spending, which makes up about 70% of the economy, though bigger wage gains may be needed to sustain the momentum.
“You have an economy that is improving, it’s getting better, but it’s not back to happy days,” said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina, who projected a 0.4% gain. “It’s consistent with a moderate gain in consumer spending, but not a revival of the great American consumer.”
Estimates in the Bloomberg survey ranged from gains of 0.2% to 1%. The reading for April was previously reported as a 0.1% increase.
Six of 13 major retail categories showed gains last month, indicating the advance wasn’t broad-based, today’s Commerce Department report showed. The increase was paced by a pickup in demand at auto dealers and service stations. Excluding those two categories, sales were unchanged after a 0.3% increase in April that was previously estimated as a 0.1% drop.
Job market improvement is probably underpinning spending, giving more American households the means to shop. The economy added 217,000 positions in May after a 282,000 gain the prior month.
Another report today showed the number of American filing claims for jobless benefits rose to 317,000 last week, according to Labor Department figures. The total was lower than the 324,000 average so far this year, a sign that companies are retaining staff to meet the pickup in demand.
“The incoming U.S. indicators are consistent with the substantial rebound in growth for the current quarter,” Emily Kolinski Morris, senior U.S. economist at Dearborn, Michigan- based Ford Motor Co., said on a sales call on June 3. “Recent readings on housing have improved slightly and the labor market continued its gradual recovery.”
Stocks declined, with the Standard & Poor’s 500 Index (CME:SPM14) falling for a third day, after the reports. The S&P 500 retreated 0.2% to 1,940.96 at 9:47 a.m. in New York.
Today’s retail report showed sales rose 1.4% at automobile dealers after a 0.9% increase the prior month.
Industry figures on June 3 showed demand surged in May, with purchases of cars and light trucks reaching a 16.7 million annualized pace, the highest since February 2007.
Retail sales excluding autos rose 0.1% after a 0.4% increase in April, today’s report showed. They were projected to advance 0.4%, according to the Bloomberg survey median.
Core sales, the figures that are used to calculate gross domestic product and exclude such things as autos, gasoline stations and building materials, were unchanged last month after a revised 0.2% increase in April. The prior month had previously been reported as a 0.1% drop.