Auto Sales Help Retailers to Another Gain in May

From Associated Press

Retailers rang up a 0.8% increase in sales in May, the third advance in four months, in part because customers were returning to automobile showrooms, according to Commerce Department statistics released Thursday.

But some analysts expressed doubt that the pace can be sustained.

“Consumer debt is now at a record 20.8% of income and borrowing is slowing,” economists at Merrill Lynch & Co. told clients in an analysis. “Credit card delinquencies and personal bankruptcies are rising.”

Analysts also said the temporary forces that led to a boost in spending in recent months--a boom in mortgage refinancing, capital gains and tax refunds--are receding.


As a result, the Merrill Lynch economists said, “we expect spending to slow in the second half.”

There are indications that job growth may already be moderating. The Labor Department, for instance, reported Thursday that new claims for unemployment benefits rose last week for a second consecutive week.

As for consumers, the Commerce Department reported that in May, when 348,000 new jobs were created, retail sales totaled a seasonally adjusted $205.5 billion, up from $203.9 billion the month before.

Retail sales account for about a third of the nation’s economic activity.


Although the increase was slightly below the 1% gain many analysts had expected, it still was strong enough to spook investors for a time Thursday. Investors are fearful that a too-robust economy will prompt the Federal Reserve Board to raise interest rates.

The Dow Jones industrial average closed down 10.34 points on Thursday, at 5,657.95, recovering somewhat from a greater loss earlier in the day. Bond prices rose.

The Commerce Department report released Thursday contains revised figures for April. Sales for that month, despite a 3.8% drop in motor vehicles, fell just 0.1%, less than the 0.3% drop initially reported.

May’s retail sales are 5.5% above those of a year earlier. Auto dealerships rebounded during the month, seeing a 2.1% sales increase. Leaving out motor vehicles, which account for about a fourth of the total, sales were up 0.3 % for May.


Sales of furniture and other home items were up 1.6%, benefiting from a strong housing market.

Sales of big-ticket durable items--goods expected to last more than three years--were up 1.9%, more than overcoming the 1.8% loss for April.


Retail Sales


Total retail sales in billions of dollars, seasonally adjusted:

May 1996: $205.5

Source: Commerce Department