US retail sales fell in May for the first time in 11 months as receipts at car dealers dropped sharply, but the decline was less than expected, offering hope of a pick-up in economic activity.
Total retail sales slipped 0.2 per cent, the Commerce Department said today, after a 0.3 per cent rise in April.
Economists had expected retail sales to fall 0.4 per cent.
A separate report from the Labor Department showed producer prices rose 0.2 per cent, braking sharply from April's 0.8 per cent increase.
"The consumer isn't dead. It's good news for the day, and further evidence that while perhaps not robust, the recovery is bumping along in fits and starts," said Michael Farr, president of Farr, Miller & Washington in Washington.
US stocks rose on the better-than expected retail sales number, while Treasury debt prices extended losses. The dollar rose against the yen.
The economy started the year on a soft note beset by bad weather and rising oil prices, and a raft of surprisingly weak data recently has shown the lull in activity extending well into the second quarter.
A report earlier this month showed US employers added a scant 54,000 workers to their payrolls in May.
Economists pin much of the recent weakness on high fuel prices and supply chain disruptions from the earthquake and tsunami in Japan and say a new recession is not in the offing.
Instead, they look for activity to pick up in the second half of the year as fuel prices continue to moderate and the situation in Japan improves, although sovereign debt problems in Europe remain a wild card.
That view was bolstered by the slowdown in wholesale prices, with core producer prices rising 0.2 per cent last month after increasing 0.3 per cent in April.
Retail sales last month were depressed by a 2.9 per cent drop in sales of motor vehicles, the largest decline since February 2010, as a shortage of parts following the earthquake in Japan left inventories lean and prompted manufacturers to raise prices.
Excluding cars, retail sales rose 0.3 per cent last month, the smallest gain since July, after rising 0.5 per cent in April.
Receipts at fuel stations rose 0.3 per cent after increasing 1.4 per cent the prior month.
While cooling fuel prices were also a drag on retail sales last month, they should help to ease some of the strain on household budgets and underpin growth.
The report painted a generally weak picture of consumer spending, with sales at food and beverage stores falling 0.5 per cent, while receipts at sporting goods, hobby, book and music stores dropped 0.4 per cent.
Reuters
