May Retail Sales Could Spell Trouble for Economic Recovery, says Professor Sherry Jarrell

U.S. retail sales dipped .2 percent last month from April
Reposted from Winston-Salem Journal | By Fran Daniel

Fewer car sales in May and less money in consumers' pockets because of high gas prices caused sales among U.S. retailers to drop for the first time in 10 months.

Retail sales fell 0.2 percent last month to $387.1 billion, the U.S. Census Bureau reported Tuesday.

If you exclude auto sales, which declined 2.9 percent, retail sales rose 0.3 percent.

Sherry Jarrell, an economics and finance professor at Wake Forest University Schools of Business, said that the retail sales numbers for May "spell trouble" for economic recovery both locally and nationally.

"A decrease in retail sales shows that consumers are worried about the future." Jarrell said. "They are either holding on to any extra cash in order to get them through the bad times ahead, or they do not have enough disposable income now to spend on anything other than necessities."

The slump in retail sales was the latest report signaling that the economy has lost momentum. Consumers are struggling to deal with high gasoline prices and a slowdown in hiring.

While the surge in gas prices eased in May, pump prices are still significantly higher than a year ago.

A lack of deals and the shortage of some fuel-efficient models in high demand were to blame for the decline in vehicle sales. The earthquake and tsunami in Japan disrupted shipments of cars and component parts to the United States.

For May, sales at gasoline stations rose 0.3 percent, much slower than the 1.4 percent jump in March.

Jarrell said the drop in the May retail sales is evidence that the economy is not recovering.

"You could look at it as glass half-full versus glass half-empty," she said. "It wasn't as bad as it could have been given the disaster in Japan and given the rise in gas prices, but in order for us to recover and to have a healthy economy, we need to just not hold our own. We need to be improving."

Tiffany Chaney, the store manager at the JCPenney at Hanes Mall, said May was a tough month for most retailers.

She said business was affected by high gas prices and the fact that Mother's Day came just two weeks after Easter.

"People have less to give us," Chaney said.

She is encouraged that customer traffic has picked up this month in her store over last month.

"As soon as gas prices start dropping, it's a shift," she said.

Sales at department stores and big general merchandise stores such as Walmart and Target edged down 0.1 percent in May.

Limited, the Columbus, Ohio-based operator of Victoria's Secret, reported a 6 percent gain in May same-store sales from the same month in 2010, missing the 7.4 percent average of analysts' projections compiled by Retail Metrics.