0.8% Drop in Retail Sales Cools Hopes of Economists

Retail sales fell 0.8% in May, the Commerce Department said today in a report that gives no comfort to economic planners hoping for a second-quarter resurgence in growth.

Analysts had been looking for consumer demand, which has been relatively strong until now, to keep the economy moving ahead despite serious problems in the manufacturing sector.

The economy grew at an annual rate of only 0.7% in the first quarter and today’s report casts doubt on how much faster it can expand in the current quarter.

Consumer spending, including purchases of foreign-made goods, has been credited as playing a major role in keeping the economy from slipping into recession during the last six months.

May’s 0.8% decline was doubly troubling coming on the heels of a revised 2.4% increase in April. Sales were down 0.2% in March.

Commerce Secretary Malcolm Baldrige chose to focus on the April-May average in his assessment of the report, noting that it was 2.2% above the first-quarter average. This, he said, indicates “that consumer demands are growing at a healthy pace.”