Retail sales jump 1% with boost from Uncle Sam
Sales excluding gasoline rise at fastest pace in a yearExplore related topics
Automobiles Story Comments (130) Alert Email Print ShareBy Rex Nutting, MarketWatch
WASHINGTON (MarketWatch) - Jump-started by an infusion of nearly $50 billion in stimulus checks from Uncle Sam, retail sales rose a surprising 1% in May, the fastest increase in six months, the Commerce Department reported Thursday.
Sales were boosted by higher gasoline and food prices and by eye-catching gains at building materials stores and furniture stores.
Treasurys fell on the news, sending yields higher. See Bond Report.
The retail report was "serious and raises risks of earlier and more pronounced rate hikes" from the Federal Reserve, wrote Stephen Gallagher, economist for Societe Generale.
Motor vehicle sales rose 0.3% in dollar terms, despite a decline in unit sales reported by the automakers. Excluding autos, sales rose 1.2%, also the biggest gain in six months. Read the full report.
Excluding the 2.6% rise in gas station sales, sales increased 0.8%, the biggest gain in a year.
Sales are up 2.5% in the past year, while sales excluding autos are up 4.9%. The figures are not adjusted for price changes.
The report was much better than expected, including hefty upward revisions to sales figures for March and April. Economists surveyed by MarketWatch were expecting total sales to rise 0.6% in May and for sales excluding autos to rise 0.8%. See Economic Calendar.
The strong retail sales figures show consumers continue to spend freely, despite the lowest consumer confidence figures in decades. Consumers have been walloped by higher food and energy prices, by declining home values and by sluggish wage growth.
But when they got their $600 check from the IRS, they spent a good chunk of it, just as Congress hoped when it passed the $160 billion stimulus plan in February.
Consumer spending is on track for 2% annualized growth in the second quarter, enough to keep the economy "safely away from negative growth," Gallagher said.
All the stimulus checks will be delivered by mid-July. Economists and policymakers are anxiously waiting to see if consumers will finally rein in their spending at that point, as many have been predicting for years.
Consumers have never been more indebted and are spending nearly every penny they earn.
In separate reports, the Labor Department said initial claims for jobless benefits rose by 25,000 last week to 384,000. See full story.
Also, the government said import prices rose 2.3% in May, including a 0.5% increase excluding fuels. See full story.
Details of retail sales
Motor vehicle sales rose 0.3% in May and were down 7% in the past year.
Sales at furniture stores rose 0.4%, the biggest increase in 10 months. Sales at electronics and appliance stores rose 0.7%. Sales at building supply and garden stores rose 2.4%, the second straight increase over 2%.
Typically, sales of consumer durables flatten out when home sales decline.
Sales at general merchandise stores rose 1.2%, including a 0.8% increase at department stores. It was the largest increase at general merchandise stores in 14 months.
Sales at clothing stores rose 0.5%. Sales at leisure-goods stores rose 0.7%. Sales at health and drug stores rose 0.8%.
Sales at food stores rose 0.4%. Sales at restaurants and bars rose 0.8%.
Sales at nonstore retailers rose 1.6%, as high gas costs encouraged more consumers to shop online or through catalogs.
Rex Nutting is Washington bureau chief of MarketWatch.
