WASHINGTON — Spurring optimism among economists that consumers may be shaking off their shopping doldrums, the Commerce Department reported Thursday that retail sales in May at apparel and accessory stores increased a seasonally adjusted 1 percent.
The federal government also revised its April apparel and accessory store retail sales numbers, which now reflect only a 1.8 percent monthly decline instead of a 3.2 percent drop as first reported. Department store and general merchandise store sales, off in April by 1.2 percent and 0.7 percent, respectively, rebounded in May with sales at both increasing 0.7 percent for the month.
The May retail numbers were “better than most anticipated,” said Rosalind Wells, chief economist with the National Retail Federation. “If we had had more seasonable weather, the numbers probably would have looked even better. I think…we’ll see a stronger second half.”
A combination of falling gas prices, low interest rates and newly passed tax cuts should help strengthen consumer confidence, Wells said.
“The big problem is still the employment sector,” she said. “We have to see that strengthen, but that’s the last thing we’ll see improve as a lagging indicator.”
All retail sales in May increased 0.1 percent for the month, reflecting a 4.3 percent drop in gasoline prices, which are still 4.7 percent above year-ago levels.
Compared with May 2002, sales at apparel and accessory stores last month increased 2.1 percent. Department store sales over the year were down 4.3 percent in May and general merchandise stores posted a year-over-year gain of 3.6 percent.
Retail sales have been following a roller-coaster pattern for more than a year. Since the end of the war in Iraq, retailers, economists and federal officials have been wondering whether consumers would shake off their uncertainty and start buying again in earnest.
The positive retail sales numbers indicate “the economy is beginning to recover,” said Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University.
However, given the huge markdowns in apparel prices, Dhawan noted retail profit margins continue to lag and aren’t yet being boosted significantly by increased volume. Dhawan forecast a “slow and steady recovery by the end of the year,” barring any significant events like a resurgence of SARS or conflicts. The period of economic uncertainty, he said, “is by no means all over.”