High Gas prices likely dampened May retail sales

U.S. retailers are expected to show a small increase in May sales, as high gas prices softened spending and  consumer demand for summer clothing and other discretionary items.

Analysts on average are expecting a 5.3 percent increase in May sales at stores open at least a year, according to Reuters. That compares with gains of 8.9 percent in April, when sales were fueled by a late Easter holiday, and 2.6 percent in May 2010, when many experts feared a double-dip recession.

Experts debate to what extent will the jump in fuel prices continue to take the edge off of growth, but as we move into several months of high fuel prices, we’re starting to see some effects in May.

Although U.S. gasoline prices fell to an average of $3.90 per gallon in the latest Lundberg Survey, Gas hit $4 per gallon earlier in May and has been above $3 per gallon for most of the year. High fuel prices affect shopping behavior. The longer those fuel prices persist, it’s more likely to affect the average household budget.

U.S. consumers turned more pessimistic in May, according to an index of consumer sentiment, while home prices fell back below crisis-era lows in March, as the economy that continues to show signs of a struggle.

May is not  a big month for shopping, it falls after the Easter holiday and before the back-to-school season. Retailers have been struggling with a slow job recovery that has kept spending levels low, especially for lower-income households.

The weather across much of the country was cool and rainy; many retailers also blamed bad weather for lackluster sales in the first quarter.

The biggest May sales increase, 7.3 percent, is expected from discount stores that appeal to consumers on a budget, such as Costco and Target, according to Reuters.

Clothing companies such as Gap Inc , TJX Cos Inc  and Limited Brands Inc are expected to turn in the smallest gain, of 2.5 percent.

TJX, Chico’s FAS Inc  and Ann Taylor parent Ann Inc indicate that May was strong, while Pacific Sunwear of California Inc , Aeropostale Inc (ARO.N) and Urban Outfitters Inc  saw generally weak trends.

Though they have not commented on May trends, early data suggests Limited and Ross Stores Inc probably performed well, while Gap was likely soft.

Consumer strategists say retailers that cater to lower-income consumers are expected to struggle throughout the year, since their customers are more affected by unemployment and higher food and fuel prices than a recovering stock market.


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