Consumers Pull Back Spending in May 2010

In a setback for the U.S. economic recovery, retail sales unexpectedly fell hard in May as consumers pulled back their spending on things from cars to clothing.


Retail sales tumbled 1.2%, the Commerce Department said Friday, prompting one forecaster to lower its outlook on second-quarter economic growth.

The retail sales report "is a reminder that households are not going to be the engine of growth for some time," Capital Economics economist Paul Dales wrote in a note, adding that the retail sales report "dramatically weakens the outlook for consumption growth in the second quarter."

Sectors showing losses:

Building and Garden Supply      -9.3%

Autos                                       -1.7%

Gas stations                              -3.3%

Clothing stores                          -1.3%

In spite of this and the high unemployment rate, some sectors showed modest gains:

Furniture sales                          1.0%

Electronic and Appliance          0.6%

Health and personal care           0.3%

Internet sales                            2.0%

Sporting Goods and Hobby      0.4%

Restaurant and bar                    0.1%

"Consumers are still shopping despite high unemployment, sluggish income growth, and relatively tight credit," said Insight Economics analyst Steven Wood.