Shoppers are back: Retail sales climb 1.2% in May

Shoppers are back: Retail sales climb 1.2% in May
Shoppers walk past a Dior shop on Rodeo Drive in Beverly Hills on April 2. (Richard Vogel / Associated Press)

Retail sales climbed in May as shoppers opened their wallets a little wider at stores and restaurants, signaling a stronger economic rebound.

Economists said the sales boost reflected improvements in wages and other areas that left consumers feeling more flush. Rising home prices and a robust stock market have pushed the net worth of American households to a high in the first three months of the year, the Federal Reserve said Thursday.

“Consumers are spending a little more freely now that winter is firmly behind us,” said Scott Hoyt, senior director of consumer economics at Moody's Analytics.

“Job gains remain sufficient to tighten labor markets,” he said, while “housing markets will keep improving as well, as rising house prices lift wealth and construction.”

Retail sales jumped 1.2% last month from April, the Commerce Department said Thursday. Stripping out the volatile category of motor vehicles and parts, retail sales rose a healthy 1%. April sales, initially reported as flat, were revised upward to 0.2%.

At the Glendale Galleria on Thursday, Arev Tatarian, 19, said she recently landed a better-paying job as a cosmetics saleswoman and was now treating herself to things that she wanted.

“I got a new phone, I just bought a car,” the Glendale resident said. “I'm not counting the dollars anymore.”

But analysts are split about how eager shoppers are to spend, even as they enjoy savings at the pump.

In earlier months, many consumers squirreled away that extra gas money instead of indulging in shopping trips. American drivers have been saving almost $12 billion a month from lower gas prices, said Craig Johnson, president of Customer Growth Partners. But only about $5 billion a month has been plowed back into the economy at retailers.

“People are spending a little more than they did last year,” said Hakon Helgesen, an analyst at retail research firm Conlumino. But “they are certainly not splurging.”

Consumer spending makes up more than two-thirds of economic activity, making retail sales a strong gauge of the nation's economic health.

In May, average hourly wages climbed 3 cents to $24.87; compared with a year ago, wages are up 2.3%.

Strong job gains last month soothed worries that the U.S. economy would continue sputtering after a harsh winter damped business activity and curtailed people's urge to shop.

May's payroll increases indicated that the economy is on the path of solid growth for the rest of the year, economists said. Many analysts have predicted that the Federal Reserve will implement its first rate hike in almost a decade at its meeting in September.

The U.S. economy “has the wind in its sails at the moment,” said Mike Jakeman, global analyst for the Economic Intelligence Unit. “It suggests that growth in the second quarter will snap back sharply from the contraction seen” in the first quarter of 2015.

The encouraging retail sales report helped lift U.S. stocks for a second day on Thursday. The Dow Jones industrial average increased 0.2% to 18,039.37.

Eleven of the Commerce Department's 13 categories reported growth in May.

Building material and garden suppliers, boosted by warm weather, said sales rose 2.1%. Sales for furniture retailers climbed 0.8%. Gasoline stations increased 3.7%, reflecting an overall increase of prices at the pump.

Despite encouraging signs of growth, not all shoppers were ready to go on spending sprees.

Terri Washington, 39, said she was cutting back on buying unnecessary items. She said food prices are going up, and her utility bill is higher as well. The West Los Angeles hairstylist said her clients are also stretching out the time between hair appointments in order to sock more into savings.

“They're not coming every single week for a shampoo,” she said. “They're doing it at home.”

Follow Shan Li on Twitter @ByShanLi

Times staff writer Whip Villarreal contributed to this report.