Americans pulled back on their spending in May after a tepid April, underscoring how fragile the consumer spending recovery remains, new data released Thursday show.
Cool weather and a quirk in the calendar — a late Memorial Day weekend that hurt May's business but should boost June's figures — dampened spending on almost everything from clothing to major appliances. The figures, from MasterCard Advisors' SpendingPulse, include spending in all forms including cash from May 2 through Saturday.
But weakness in the past six weeks is due to more than thermostat and calendar flukes, analysts said. They cited unemployment, stock market jitters and the end of government funded rebates on energy-efficient appliances.
"I don't think you can explain away all the weakness just based on the calendar shift," said Michael McNamara, vice president of research and analysis for SpendingPulse.
The data come just ahead of Thursday's release by selected major retailers of figures comparing their May sales at stores open at least a year with May 2009. Those figures are now expected to fall short of original estimates.
The SpendingPulse data showed retailers' revenue fell in May in most categories including men's and women's clothing and footwear, furniture and electronics — and that's compared with the depressed figures of a year earlier. There were gains in children's fashions, luxury and home furnishings, but they were smaller than earlier in 2010.
Online spending was the bright spot, rising by double-digit percentages for the sixth month in a row.
Stubbornly high U.S. unemployment and steep stock market declines related to fear that the European debt crisis will slow global growth "cast a bit of a shadow on the recovery in consumer spending," McNamara said. "Consumers are taking a pause."
The International Council of Shopping Centers, which releases its monthly index of retailers' revenue Thursday, now sees it rising 2 percent to 2.5 percent, down from an original forecast of 3.5 percent. The comparison of monthly sales from one year to the next is considered a key indicator for retailers because it excludes results from stores that open or close during the year.
In the first quarter, as the stock market rallied, consumer spending and confidence both rose.
The Conference Board's consumer confidence index improved in May for the third straight month, though it remained below what's considered healthy. While the measure included volatile days on Wall Street, it excluded the 376-point plunge on May 20, its worst one-day drop in more than a year. Now there's concern consumer confidence could fall back down if stock declines continue.
The Dow fell 7.9 percent for the whole month, its worst May since 1940. Now economists worry that businesses will limit hiring.
Robert Yerex, an economist at Kronos, a work force management company that tracks hiring among 69 large retailers, said stores didn't hire as many workers in May as April. "There's concern about a double dip recession," he said.
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