Retail Sales Fell in May by -1.6%, Helped by -7% Drop in Gas Prices; 7th Straight Pos. Annual Gain
On an annual basis, consumer spending was up by 6.9% in May, marking the seventh straight month of positive annual increases starting in November of last year, following 14 straight months of year-to-year declines from September 2008 to October 2009 (see middle chart above). As both the middle chart (annual percent change in sales) and bottom chart (retail sales in dollars) indicate, there is a lot of "noise" or monthly variations in retail sales, so the -1.6% drop in May should be considered with that in mind, especially given the largest monthly decrease in gas prices in 17 months.
But here's how it's getting reported by AP in a story titled "Unexpected decline in retail sales fans recovery fears": "Retail sales plunged in May by the largest amount in eight months as consumers slashed spending on everything from cars to clothing. The big drop raises new worries about the durability [and strength] of the economic recovery."
The AP report does briefly mention gas prices: "Gasoline stations sales were down 3.3 percent, a drop that reflected in part lower gasoline pump prices during the month." But they fail to mention that it was the largest monthly decline in gas prices since 2008, and that lower gas prices and lower spending at gas stations is a POSITIVE factor for consumers, not NEGATIVE.
Finally, auto sales increased by 3.74% in May according to the BEA (data here), at least in terms of unit sales, so it's interesting that the Census retail sales report is showing a -1.7% decline in May spending on motor vehicles (of course, it could be higher unit sales for lower priced cars?).
Update: Now an even more recent AP story this morning reports that "Consumer sentiment strongest since January 2008."
In my opinion, any "worries about the durability and strength of the economy recovery" might make a good headline or news story, but are unwarranted and unsupported by the data.
New Update from First Trust: "It’s important to focus on “core” retail sales, which excludes autos, building materials, and gas. These sales increased 0.1% in May. That’s right, increased, bringing the total gain over the past year to 4.5% and with May an annualized 3.1% above the first quarter average."