Rising prices at the gasoline pump drove retail sales higher in May, the government reported on Thursday, but consumers were also spending more at car dealerships, grocery stores and clothing shops.þþThe Commerce Department reported that retail sales rose a seasonally adjusted 0.5 percent in May from a month earlier, after falling the two previous months. The monthly increase indicated that consumer spending was creeping higher as gas prices rose and the economy’s declines began to level off.þþ“It’s price-driven,” said Ryan Sweet, senior economist at Moody’s Economy.com. “Consumers are prioritizing, focusing their spending on necessities. If gasoline prices continue to climb, their purchasing power will take a big hit.”þþThe increase in May sales matched the expectations of many economists.þþSales at gasoline stations, though 33.8 percent lower than the previous May, rose 3.6 percent from April. Gasoline prices have risen to a nationwide average of $2.63 a gallon as crude oil prices rise, driven higher by signals that the recession’s worst days may be over and by concerns about inflation in the future.þþSales at automobile and parts dealerships rose 0.5 percent from April, a sign that consumers took advantage of big discounts as automakers like Chrysler and General Motors prepared to shut down hundreds of dealerships. Sales at dealerships were down 19.6 percent from the May a year ago. þþRetail sales were still 9.6 percent below their levels from last year, and economists said that consumer spending, while stabilizing, was not likely to come roaring back this year. Consumers were saving more of their income and spending less as they worried about the prospect of rising unemployment and wage cuts. þþAlso on Thursday, the Labor Department reported that first-time jobless claims fell more than expected last week in a continuation of some marginally better indications from the job market. Claims for unemployment insurance fell 24,000, to a seasonally adjusted 601,000. þþLast week, the government reported that 345,000 jobs vanished in May, a stark figure but a much slower pace of job losses than months earlier, when as many as 741,000 jobs were lost in a single month. Economists still expect businesses to continue cutting jobs for much of this year, but at a declining pace.þþ“The underlying tone of consumer spending remains weak, and while the steep declines in consumer spending seen over the second half of 2008 have been arrested, sales have at best stabilized at a low level,” Richard Moody, chief economist at Forward Capital, wrote in a research note.þþAs income growth dwindles and the recession lingers, consumers are cutting nonessential spending from their budgets, as evidenced by continued declines in luxury purchases and sliding sales at high-end retailers, economists say. þþ“It’s still in search of the bottom,” Michael P. Niemira, chief economist of the International Council of Shopping Centers, said of the retail market. þþA gauge of how businesses are adapting to the recession and lower levels of consumer demand showed that companies continue to slash their inventories. The government reported Thursday that business inventories fell 1.1 percent in April from a month earlier, their eighth consecutive month of decline.þþ
Source: NY Times
