Retail Sales Decline 3rd Month in a Row : Economy: Experts apparently underestimated consumer caution about purchases.

From Reuters

Retail sales fell a surprising 0.7% in May, marking the first time since the last recession that sales have retreated three months in a row, the Commerce Department said today.

Wall Street economists had forecast a slight 0.1% gain. But they apparently underestimated consumer caution about making purchases amid uncertainty about the economy’s direction. Sales were lower in nearly all major categories of goods.

The May decline follows a revised decline of 0.9% in April and 0.4% in March. Officials said the last time retail sales fell for three consecutive months was between September and November of 1981, when the country was mired in a severe recession.

The drop in May retail sales “is a new sign the Federal Reserve will have to look at the whole rate picture,” said Rutherford, Brown & Catherwood managing director Thom Brown.


“This economy is not as healthy as most experts thought,” which adds pressure on the Fed to act quickly to ease credit and stimulate the economy, Brown said.

Auto dealer sales, which account for about a fifth of total retail sales, fell 0.6% in May after declining 1.6% in April.

Spending by consumers accounts for about two-thirds of the nation’s gross national product, or GNP, so any slowdown in retail business can affect output of goods and services fairly quickly.

Analysts have noted that total sales growth in the final three months of 1989 and the first quarter this year averaged only a 4.1% annual rate, barely enough to keep pace with the core rate of consumer price inflation that is assumed to be between 4% and 4.5%.


The April fall in retail sales was initially reported as a 0.6% decline but that was revised to a 0.9% decrease.

Aside from cars, gasoline service station sales fell 1.6% in May after a 1.9% April drop while drugstore sales decreased 1.3% last month after rising 2.1% in April.

General merchandise store sales fell 1% in May after a 2.1% April drop while clothing store sales rose 2.4% after a 2.4% April fall.

Sales of building materials in May fell 4.2% after a 3.2% April decline. Food store sales fell 1% last month after a 1.2% rise in April.


Furniture store sales were down 1.1% in May after a rise of 0.5% in April.