Retail sales show signs of improvement in May

Following a stretch of very modest retail sales gains in recent months, a more positive performance in May, based on data issued by the United States Department of Commerce and the National Retail Federation (NRF) could potentially pave the way for more meaningful gains in coming months.

Commerce reported that May retail sales at $444.9 billion were 1.2 percent higher than April and up 2.7 percent compared to May 2014. It added that total retail sales from March through May were up 2.1 percent annually.

And the NRF said that May retail sales, which exclude automobiles, gas stations, and restaurants, were up 0.8 percent compared to April and increased 1.9 percent annually. NRF officials said that thee gains signify renewed momentum heading into the second half of 2015.

“With income, employment and consumer confidence all improving, consumers were encouraged to open their wallets this spring,” wrote NRF Chief Economist in a blog posting. “Retail sales gains were evident across business sectors with the one exception being health and personal care stores. The improvement in retail sales is consistent with employment gains and the recent uptick in consumer credit.

Kleihnenz added that, overall, retail sales are growing at a reasonable pace and regaining momentum , with the latest economic data showing improvement in the economy, with stronger sales expected as jobs and income pick up. But he also noted that comes with a caveat that stronger wage growth is needed to sustain further gains in retail sales.

These gains in retail sales numbers follow improving consumer confidence numbers. One reason for improved retail sales being slower than expected to develop, according to many economists, is that lower fuel prices, which were expected to result in increased consumer spending, were instead used to pay down debt, which, in turn, resulted in ongoing stagnant or sluggish retail sales output.

But that may have changed in May, according to IHS Global Insight Director of Consumer Economics Chris Christopher.

“In May, consumers came back with a vengeance. Retail gains were broad based and relatively robust,” he wrote in a research note. “The May retail sales report indicates that consumers are starting to use some of their so-called gasoline price dividend at the shopping mall. There were several other positive signs on the consumer front for the month of May as well, including a well-received employment report, robust light-vehicle unit sales, and an increase in the Conference Board’s Consumer Confidence Index. We expect real consumer spending growth to be stronger in the second half of the year. This is positive news for retailers since it suggests consumer spending momentum as the back-to-school shopping season approaches.”