Retail Sales Fall in May for First Time Since June 2010

The 0.2% decline wasn't huge but marks a significant turning point as consumers pull back

600 shopping REUTERS Lucas Jackson.jpg

We've got another sign that the economy has hit a bump: American consumers reduced their retail spending in May. Retail and food services sales declined by 0.2% during the month, according to the Census Bureau. That might not sound like much, but it's the first time we've seen sales decline since June 2010, any only the fourth time they've fallen since March 2009. If you consider that prices likely rose in May, then the amount of goods and services purchased declined by even more.

First, here's the basic chart:

retail sales 2011-05 basic.png

That flat-looking spot to the right is what we've seen over the past couple of months. Sales growth had been falling since March and finally went negative in May. Every month this year marked a new all-time high for retail sales and food services sales until last month's decline.

Since we know that gasoline prices rose in May, probably drove inflation more than other goods and services, let's take gas stations out of the equation to try to limit the effect of rising prices:

retail sales 2011-05 no gas.png

Without gasoline, retail sales fell by 0.3%. That's not a big difference, which might be surprising since gasoline prices rose by around 2.5%. This can be explained by a decline in the amount of actual gasoline purchased, as gas station sales only increased by 0.3% -- far less than prices rose from April to May.

Here's how the other categories of products fared from month-to-month:

retail sales 2011-05 cats.png

You can see that autos took a big hit, as we should have expected. Electronics and appliances sales also fell fairly significantly, as did furniture sales. The only category to rise by more than 1% was building and gardening materials, which is a little surprising considering the weakness of the housing market. But perhaps the onset of warm weather has spurred more gardening and home improvement.

This decline in retail sales doesn't indicate we're in for a double dip recession -- yet. But if sales continue to fall, and by greater and greater margins, then we should start to worry. A few months of declining sales could just be a readjustment to rising prices. But if consumer pessimism catches on and intensifies, then firms may halt the little hiring they're doing and layoffs could begin again.

Presented by

Daniel Indiviglio was an associate editor at The Atlantic from 2009 through 2011. He is now the Washington, D.C.-based columnist for Reuters Breakingviews. He is also a 2011 Robert Novak Journalism Fellow through the Phillips Foundation. More

Indiviglio has also written for Forbes. Prior to becoming a journalist, he spent several years working as an investment banker and a consultant.

How to Cook Spaghetti Squash (and Why)

Cooking for yourself is one of the surest ways to eat well. Bestselling author Mark Bittman teaches James Hamblin the recipe that everyone is Googling.

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register.

blog comments powered by Disqus

Video

How to Cook Spaghetti Squash (and Why)

Cooking for yourself is one of the surest ways to eat well.

Video

Before Tinder, a Tree

Looking for your soulmate? Write a letter to the "Bridegroom's Oak" in Germany.

Video

The Health Benefits of Going Outside

People spend too much time indoors. One solution: ecotherapy.

Video

Where High Tech Meets the 1950s

Why did Green Bank, West Virginia, ban wireless signals? For science.

Video

Yes, Quidditch Is Real

How J.K. Rowling's magical sport spread from Hogwarts to college campuses

Video

Would You Live in a Treehouse?

A treehouse can be an ideal office space, vacation rental, and way of reconnecting with your youth.

More in Business

Just In