Materials handling business: May retail sales show a slight decline

Unlike the previous two months, retail sales growth momentum saw a dip from April to May but saw slight year-over-year increases, according to data released by the United States Department of Commerce and the National Retail Federation.

May retail sales, which include non-general merchandise like automobiles, gasoline, and restaurants, at $362.5 billion, were down 1.2 percent from April and up 6.9 percent year-over-year, and total retail sales for the March through May 2010 period were up 8.1 percent year-over-year, according to the Department of Commerce.

And the NRF reported that May retail sales (which exclude automobiles, gas stations, and restaurants) fell 1.4 percent seasonally-adjusted from April and were up 2.7 percent unadjusted annually.

“Even though May sales were not as strong as previous months, we remain encouraged by the steady pace of the economic recovery,” said Rosalind Wells, Chief Economist for NRF, in a statement. “Ultimately consumer momentum will be tied to our economy’s ability to add private sector jobs.”

Even though retail sales are down sequentially, recent upticks in sales are not entirely surprising, considering that various economic indicators and media reports in recent weeks have pointed to some improvements in the job market, and ongoing strength in the manufacturing sector.

And at the same time, consumers have started to emerge from the bunker and begun spending more, albeit cautiously. This has also been apparent in freight transportation volumes, which are seeing consistent sequential and annual gains, due to increased consumer spending, coupled with retailers slowly building up inventories after deliberately keeping them low for months to better match up with previously sluggish demand following the depths of the recession.

Industry sources have told MMH that since November the overall market feels better due to retailers putting themselves in a position to have ample spring inventory in place.

What’s more retail sales are turning in steady performances at a time when unemployment remains high, coupled with the national personal savings rate at about 5.5 percent-compared to zero in the past-which has lowered the new normal consumption rate, and will build up slowly from this point.

“By and large the trend [regarding retail sales] continues to be up,” said Eric Starks, president of freight transportation consultancy FTR Associates. “But with this choppiness from April to May, you need to look at what is happening on a three-month average basis; activity continues to move higher overall.”

At the same time, Starks said, consumers are perhaps being cautious still, with most thinking the economy is still moving in the right direction despite not having completely embraced the recovery.
And year-over-year gains tend to show what Starks described as a “false picture of the economy,” adding that these annual gains will start to disappear over the second half of this year and will not be nearly as high as what is being seen now.

“If we continue to start seeing strong year-over-year comparisons in the second half of the year, then that is a great thing and is what we would like to see,” explained Starks. “But we expect them to come down at a pretty modest pace over the next quarter or so.”