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Will Shoppers Increased Spending Last?

Americans are spending, but they may not be for long.

Shopping
Scott Olson, Getty Images

Some major retailers such as Target and Macy’s on Thursday posted May sales increases that beat Wall Street estimates as shoppers were lured in by Mother’s Day promotions and new, brighter styles of clothing. The gains follow a dismal showing during the month before.

But it may not be time to celebrate just yet. Revenue growth remains down from earlier in the year and worries about the global economy are starting to escalate again amid signs of worsening jobs, housing and financial markets.

Michael Niemira, chief economist at the International Council of Shopping Centers, said while May’s results are encouraging, he thinks troubling economic data will continue to weigh on consumers’ minds in the months ahead.

“There’s something out there that’s worrying consumer,” he said.

Only a handful of retailers representing roughly 13 percent of the U.S. retail industry report monthly sales figures based on stores open at least a year, which is a key measure of health because it excludes the impact of newly opened and closed stores.

But economics watch the numbers because they offer a snapshot of consumer spending, which accounts for more than 70 percent of economic activity.

On average, retailers posted a 4 percent rise in in May for revenue at stores open at least a year, according to the international shopping trade group. That’s better than the 3.6 percent analysts were expecting. It’s also up from the 2.4 percent in April — the worst monthly performance since November 2009 when the tally was down 0.2 percent.

But the latest results seem to fly in the face of negative economic news — and that worries industry watchers. The Commerce Department said Thursday that the U.S. economy grew at an annual rate of 1.9 percent in the first three months of the year, which was slower than expected. Growth of 2.5 percent is typically enough just to keep pace with population changes. The Labor Department also reported that the number of Americans seeking unemployment benefits rose last week to a five-week high, evidence that the job market remains sluggish.

And earlier in the week, the Conference Board said its consumer confidence index had its biggest decline in eight months. That ends a period of steady optimism among consumers: The figure is now at the lowest level since January.

Carla Barnes, a 39-year-old public relations manager from Waleska, Ga., said Thursday that spending money on clothing is stressful at a time when groceries are more expensive and salaries aren’t keeping pace with the cost of living. Still, she shopped in May.

“I frankly wanted to get the stuff early because of the large selection right now,” she said.

May’s data shows that other shoppers also loosened their purse strings, too. A variety of retailers, from discounters to luxury chains, posted gains during the month.

Among them, Target, a Minneapolis-based discounter, said its revenue at stores open at least a year was up 4.4 percent, beating the 3.5 percent analysts polled by Thomson Reuters were expecting as shoppers spent more on its expanded food offerings and cheap-chic fashions. Nordstrom, based in Dallas, also said the figure rose 5.3 percent, above the 4.7 analysts were expected, helped by women’s shoes, handbags and cosmetics.

And Cincinnati-based Macy’s, which reported its results on Wednesday, said the figure at its Bloomingdale’s and namesake department stores was up 4.2 percent. That beat the 4 percent Wall Street expected.

Not every retailer had strong growth, though. Indeed, the results for some retailers’ stand as reminders that Americans’ continue to be cautious about spending. Wet Seal Inc., a teen retailer, said revenue at stores open at least a year dropped 8.8 percent, which was worse than the 8.3 percent analysts had expected. And department-store chain Kohl’s Corp. also said the figure fell 4.2 percent, which was more than the 1.2 percent drop that was expected.

“It’s a continuation of the mixed story,” Niemira said. “The strong retailers continue to be strong and the weak ones continue to be weak.”

(Copyright 2012 by The Associated Press. All Rights Reserved.)

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