Lower Retail Sales Lead to Doubts About Strength of Recovery

Monthly retail sales figures recently issued by the Department of Commerce have revealed the biggest decrease since September 2009, raising worries about how strong the rebound from the recession actually is, as well as how quickly long-term economic growth may progress, according to the Retail Industry Leaders Association (RILA).

Overall retail sales dipped 1.4 percent in May from the previous month but increased 6.1 percent over sales in May 2009. Retail sales excluding auto and auto part sales fell 1.1 percent in May, but surpassed May 2009 sales by 6.1 percent.

“Retailers have long recognized that it may be a long uphill climb to full recovery, but [the] report suggests the climb may be steeper than we thought,” noted Sarah Kennedy, president of Arlington, Va.-based RILA, whose members include over 200 retailers, product manufacturers, and service suppliers, which together account for more than $1.5 trillion in annual sales, millions of American jobs and more than 100,000 stores, manufacturing facilities and distribution centers in the United States and abroad. “As an industry, we are clearly in a better position today than we were a year ago; however, consumers remain cautious. Until the overall economic news improves and those Americans out of work find employment, meaningful retail sales growth will be difficult to achieve.”

Precipitous market declines last month may have caused consumers to cut back on spending once more. Building material and department store sales saw the largest decreases in May, falling 9.3 percent and 1.8 percent, respectively, while other retail segments remained relatively flat.

The May retail sales results came in the wake of news from the U.S. Department of Labor that only 41,000 private-sector jobs were added to the economy last month.

Meanwhile, the National Retail Federation (NRF), the world’s largest retail trade association, characterized the Commerce Department’s findings as “a small speed bump” on the way to improved economic health. “May retail sales results represent a reminder of the uncertainly that still exists in the economy,” acknowledged NRF president and CEO Matt Shay. “The road to recovery is paved with caution as consumers remain concerned about key indicators such as employment and housing.”

Still, Washington-based NRF is taking an upbeat view of the industry’s economic future. “Even though May sales were not as strong as previous months, we remain encouraged by the steady pace of the economic recovery,” observed Rosalind Wells, the organization’s chief economist. “Ultimately, consumer momentum will be tied to our economy’s ability to add private-sector jobs.”

“Retailers will continue to adjust to the ebbs and flows of the recovery to meet customer needs and utilize strategies that will provide a launching pad for success as the economy regains its strength,” said RILA’s Kennedy.
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