Retail Sales Improve for Third Straight Month

Retail sales in the U.S. continue improving after slowing at the end of last year and the beginning of this year, but things could still be better.

A new Commerce Department report shows a 1.2% increase in May from the month before. It rose 2.7% from the same time in 2014, which is less than the pace this time last year.

The gains in May were broad-based, with most of the retail categories showing gains from the month before.

The April level was revised upward to a 0.2% improvement. March was also revised higher, showing a 1.5% increase, the biggest monthly gain in five years. Retail sales were down for three straight months from last December through February.

If you take out autos and gasoline, May retail sales posted a 0.7% increase.

“The May rise in retail sales was a welcome step in the right direction," said Lindsey Piegza, chief economist at the investment banking firm Stifel. "Still, coupled with a minimal rise in April, consumer spending has clearly failed to mirror the 2014-style rebound many analysts were hoping for.

“Without a strong showing from the consumer, as a consumer-based economy, we can't expect much from the second quarter growth profile,” Piegza said. “Many Federal Reserve officials were confident the weakness at the start of the year would not carry over into the second quarter. However, as consumer spending remains modest at best along with still-stagnant business investment, it appears many of the themes at the start of the year have carried past March.”

She believes that if overall U.S. economic growth falls short of a 2% annual increase in the second quarter, coupled with a 0.7% decline at the start of the year, then the economy is poised for the worst first-half performance since the Great Recession.