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US Retail Sales Up in May’09
Jun 23, 2009

US retail sales surged in May after three months, on the back of rising gasoline prices and higher demand for automobiles.
 
Reporting the first increase in the past three months, retail sales in the US surged in May due to soaring gasoline prices and an increasing demand for light trucks and cars as a result of large discounts, reported REUTERS.
 
A survey of 73 economists by Reuters revealed that retail sales in May rose 0.5% after April’s 0.4% decline. Projections ranged from a decrease of 0.3% to an increase of 1.4%. Further, the sales excluding autos were forecasted 0.2% up after 0.5% decline in April.
 
In the last two weeks of May, prices of gasoline kept on increasing, but remained around 40% down from the level in 2008. This prompted higher number of Americans to come out on the roads to celebrate the Memorial Day holiday, resulting in higher demand at the service stations.  
 
In the meantime, car manufacturers were successful in drawing buyers into showrooms, which indicated to some that the sharp fall in sales might be bottoming out. This also assisted the positive growth in retail sales.
 
Moreover, there was an increase in the sales at automobile and parts dealerships in May as compared to April, with consumers taking advantage of lucrative discount offers as automobile manufacturers like General Motors and Chrysler were planning to close hundreds of their dealerships.
 
Although the consumer expenditure might stabilize, it is unlikely to gain significant heights this year. The approach of consumers is to focus more on saving by cutting back on spending as they are concerned about the potential increase in unemployment as well as wage cuts.
 
Companies continued cutting inventories in order to adapt themselves to the recession and to cope with lower consumer demand. Also, continuous decline in the purchase of luxury items and reducing sales of the high-end retailers clearly indicate that people are holding back on non-essential expenses.
 
According to a Research Analyst at RNCOS, “However the consumer spending has revived in May, but it’s unlikely to result into extra consumer spending in near future. The weak spending shows that the people in the US are focusing on saving in wake of recession and continuous job losses. So, to see a significant recovery in consumer spending, Americans have to wait for some more time.”