At first glance, the May retail sales figures released by the Census Bureau this morning are an unalloyed negative. On a seasonally adjusted basis, sales fell .2 percent from April, although they were up 5.3 percent from May 2011. That's bad news. The U.S. is a consumer-driven economy. And with business investment and exports slowing down a bit, the expansion has reached a stage at which we really need robust consumer spending to drive growth. May's report will likely cause analysts to ratchet down their already-weak expectations for second quarter growth, and will push the double-dippers to proclaim a second recession is upon us.
But a look inside the numbers reveals something of a silver lining. In its report, Census breaks down spending by dozens of categories: grocery stores, auto dealers, men's clothing stores, etc. So it's easy to track how different sectors and areas contributed to — or detracted from — sales growth in the quarter.
Overall, retail sales in May came in at $404.596 billion, down from $405.287 billion in April. Americans thus spent $691 million less at all retail outlets in May than they did in April. That's a fair amount of lost economic activity. Now go look at the line for "gasoline stations." In April, Americans spent $45.871 billion at gasoline stations. In May, that figure fell to $44.873 billion. That's a one-month decline of $998 million, and it more than accounts for the entire decline. In fact, in May, retail sales at outlets not including gasoline stations actually rose by $307 million.
The decline in spending at gasoline stations is largely a function of the declining price of oil. But it also has something to do with the fact that with each passing month, the U.S. auto fleet becomes marginally more efficient. All things being equal, when people spend less at the pump, they tend to have some extra money to spend elsewhere. And that's what seemed to happen in both April and May. Between March and May, monthly spending at gasoline stations fell $1.644 billion; in the same period, overall retail sales have fallen by $1.6 billion.
This is not to say that retail sales aren't showing signs of weakness. They are. But on a year-over-year basis, retail sales are rising at a healthy clip. Meanwhile, consumers are putting a smaller fraction of their discretionary income and spending into their gas tanks.
Daniel Gross is economics editor at Yahoo! Finance
Follow him on Twitter @grossdm; email him at firstname.lastname@example.org
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