Less spending by Americans could slow recovery

WASHINGTON — Americans are pulling back on spending, a trend that could slow the economic recovery if it continues.

A sharp drop in retail sales revenue for May shows that shoppers remain cautious, and it could lead economists to curtail their expectations for growth.

Analysts cautioned against overreacting to Friday's Commerce Department report. It could signal a return to modest growth after two unusually strong months fueled by tax refunds, rebates for energy-efficient appliances and higher gas prices.

The 1.2 percent plunge in sales revenue was the largest drop in eight months. But excluding three of the most volatile sectors — autos, building materials and gasoline station sales — the figures actually rose one-tenth of a percentage point in May.

And figures for some industries can vary depending on how they are calculated.

For example, Commerce said auto sales fell 1.7 percent in May, but the industry itself has reported gains of 3.7 percent for the same period. They differ because the auto industry measures strictly sales volume of new cars; the government looks at revenue for cars, auto parts, tires and other products across the industry.

Economists remain concerned that spending won't pick up in months ahead.

The sharp decline in retail sales "is a reminder that households are not going to be the engine of growth for some time," said Paul Dales, U.S. economist for Capital Economics.

Contributing to the weakness is a shortage of hiring. Most economists don't expect the unemployment rate of 9.7 percent to fall much in the coming months.

fast facts

Key factors

Retail Sales: Retail sales fell 1.2 percent in May, the biggest drop in eight months; with declines in home improvements, autos and sales at gasoline stations.

Special Factors: Analysts say the home improvement sales slump reflects the ending of government rebates for energy-efficient products. Gas station sales fell because the price of gas has fallen.

Outlook: Gains in employment will be critical to consumer spending in coming months.

Less spending by Americans could slow recovery 06/11/10 [Last modified: Monday, November 7, 2011 5:25pm]

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