New May Economic Data Disappointing
June 13, 2001
Preliminary May economic data continues to be slightly negative for freight volume. Retail sales were unchanged in May, matching the unchanged report for May employment released earlier in June.
Retail sales have increased only 2% since September, marching the rise in inflation. But half of the gain occurred in March and April.
May is definitely not the month when the economy resumes sustained growth, even at a slow pace. Maybe it will be June if retailers are able to raise their orders to the same level as their sales. But if not June, don’t bet on July or August. We will have to wait until people receive their tax rebates, scheduled to be mailed from late July through Late September. If half of the total tax rebate is spent immediately on goods, retail sales will increase by 2.5 percentage point for three months.
All retail trade data was completely revised in May to conform to the new NAICS (North American Industry Classification System) mandated by the North American Free Trade Agreement. The revisions now show stronger growth than first reported in 1999 and the first half of 2000 and weaker growth than first reported in the second half of 2000 and early 2001.
Auto, clothing, computer and electronics, and general merchandise stores all had 0.5% to 1% declines in May, while furniture increased 1.2% and food stores had sales gains of 0.5%. At this stage of the business cycle, you should expect soft goods sales to be steady or have sluggish growth, while hard goods sales are erratic but generally decline slowly.