Economy Watch: Retail Sales Edge Down Because Fewer Buy Cars

Lack of auto sales pushed retail sales down in May; gas pushes up wholesale prices; and there may be hope for the labor market.

By Dees Stribling, Contributing Editor

U.S. retail sales were down in May by 0.2 percent, according to the U.S. Census Bureau on Tuesday, or to put a better spin on it, not down as much as economists expected. A recent poll of economists by Bloomberg had predicted that the drop would be 0.5 percent.

Another way to characterize the May retail data positively is to take out auto and auto parts sales. Do that and retail sales actually increased 0.3 percent for the month. The plunge in auto sales was the largest such drop since February 2010, however, with cars and trucks selling at an annualized rate of 11.8 million units in May, compared with the 13.1 million annualized rate in April. People are a little nervous about really big purchases these days, apparently.

A few retail categories gained in May compared with April, such as building materials and garden equipment sales, which was up 1.2 percent, and health and personal care stores, which scored a 0.8 percent increase. But the big monthly winner is “miscellaneous stores,” perhaps because that includes dollar stores and the like, whose sales were up 2.1 percent month-over-month. “Nonstore” retailers, that is online and mail-order retailers, gained 1.2 percent for the month.

PPI rises only slightly in May

The Producer Price Index for finished goods, which describes wholesale prices in the United States, advanced 0.2 percent in May, according to the U.S. Department of Labor on Tuesday. That’s a slowdown from the month-over-month increase recorded in April and March, which were 0.8 percent and 0.7 percent, respectively. Such an increase in wholesale prices as there was last month was driven by gas prices, for the most part.

Gas has, in fact, been a spur to higher wholesale prices for a while now. For the 12-month period ending in May 2011, finished goods prices spiked 7.3 percent, which was the steepest year-over-year gain since September 2008, when the increase was 8.8 percent. Gas represented much of that increase.

On the other hand, that trend might not last much longer (so economists can start worrying about deflation again). Labor reported a large drop in prices for what the government calls “crude materials,” which is to say raw materials, in May. Crude materials’ PPI was down 4.1 percent month-over-month. Both “crude energy” and “crude foodstuffs” contributed to the drop.

Manpower survey sees some hiring momentum

Is the U.S. labor market really set to drop off a cliff? Maybe, maybe not. According to survey results released by temp specialist Manpower Inc. on Tuesday, 20 percent of responding employers said they were going to increase staffing levels in the third quarter of 2011. Only 8 percent planned to pass out pink slips, while the majority planned no staffing changes.

Wall Street surged into positive territory on Tuesday, with the Dow Jones Industrial Average gaining 123.14 points, or 1.03 percent, thus spiking back over 12,000. The S&P 500 was up 1.26 percent, and the Nasdaq advanced 1.48 percent.

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