Retail Sales Fall

Department, specialty stores and discounters hit.

WASHINGTON — Sales tumbled across the board at specialty stores, discounters and department stores in May, as retail sales in the overall economy edged up slightly, the Commerce Department’s monthly report showed Thursday.

Apparel and accessories stores posted a seasonally adjusted 0.6 percent decline in sales to $21 billion last month, while department store sales dropped 1.4 percent to $14 billion. Sales at general merchandise stores, a category that includes department stores, fell 0.6 percent to $54.8 billion in May.

“On the surface, May retail sales were disappointing and weaker than expected,” said Jack Kleinhenz, chief economist at the National Retail Federation. “However, April’s upward revisions still indicate positive growth for the remainder of the year. Even though American consumers continue to be selective and price-sensitive, May sales were strong in many retail categories and sectors including building supply stores, furniture stores and non-store retailers. The economic fundamentals — consumer confidence, employment and income — remain strong.”

The Commerce Department revised its top-line April retail sales number to a 0.5 percent increase from the preliminary estimate of 0.1 percent growth in retail sales, which many economists, including Kleinhenz, saw as a counterbalance to the May sales report.

Scott Hoyt, senior director of consumer economics at Moody’s Analytics, said the upward revisions in April retail sales “took some of the sting out of the disappointing May numbers.” But he noted that all three categories — specialty stores, department stores and discounters — have been “underperforming” for several months.

“Consumers are still struggling because of weak income growth, particularly weak wage income growth,” Hoyt said. “Other than that, the fundamentals in the economy are pretty good. Housing prices are growing rapidly, the stock market is up at least on a year-ago basis, debt burden is down and job gains are picking up.”

In the overall economy, retail sales rose 0.3 percent to $437.6 billion in May, falling below economists’ expectations.

“In May, retail sales growth was weaker than expected and was not broad-based,” said Chris G. Christopher, director of consumer economics at IHS Global Insight. “Automobile dealerships and building material stores did very well, while discretionary spending took a hit or was relatively weaker.”

Christopher said historically there has been a correlation between an uptick in auto sales and a downturn in discretionary spending. He said the May retail sales report is “pointing to further weakness in the first quarter real consumer spending growth.”

However, IHS is predicting that stronger income growth in the months ahead will fuel back-to-school sales, which are “looking slightly better” than last year, despite deepening student loan debt, which passed the $1 trillion mark. Christopher noted that real disposable income and consumer confidence are expected to improve this year.

“This is pointing also to a slightly improved holiday retail sales season, as well,” he said.