Retail Sales Jump By Largest Amount In 6 Months
Analysts were surprised by the soild increase in retail sales and noted that sales in April were also revised to show a respectable gain of 0.4 percent, instead of the original estimate that sales had fallen by 0.2 percent.
Ian Shepherdson, chief U.S. economist at High Frequency Economics, said one possible explanation was that consumers have suddenly returned to their carefree spending ways despite weak consumer confidence readings and the credit crunch.
But he said a more likely reason was that rebate checks were giving a temporary boost to spending that would not last, resulting in weaker economic performance in coming months.
The retail sales report showed that general merchandise stores, which include department stores and discount stores such as Wal-Mart, saw sales rise by 1.2 percent, the best showing since a 2.1 percent rise in March 2007.
Auto dealers saw sales increase by a much smaller 0.3 percent in May, but that still represented a small rebound after a big 2.1 percent drop in April. Auto sales are being hurt by the weak economy and soaring gasoline prices, which have sharply depressed demand for gas-guzzling pickup trucks and sport utility vehicles.
Gasoline service stations reported sales up 2.6 percent, an increase that largely reflected soaring prices, which have pushed gasoline to above $4 per gallon nationwide. Energy Department analysts are forecasting that pump prices will keep rising, probably peaking at around $4.15 per gallon in August.
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