Consumers cut back in May, but confidence perks up

New York City Retail sales fell unexpectedly in May for the first time in eight months as Americans cut spending on a wide range of goods. The decline came even as a private survey showed that consumer confidence was increasing. The Reuters/University of Michigan Consumer Sentiment index rose to its highest level since January 2008.

U.S. retail sales fell 1.2% last month, the Commerce Department said Friday. But excluding three of the most volatile sectors -- autos, building materials and gasoline station sales -- the figures actually rose one-tenth of a percentage point -- 0.1% -- in May.

The decline cast new doubts about the strength of the economic recovery. Economists are concerned that households will start trimming outlays as they continued to be battered by high unemployment and a swoon in stock prices.

“May retail sales results represent a reminder of the uncertainly that still exists in the economy,” said NRF president and CEO Matt Shay. “The road to recovery is paved with caution as consumers remain concerned about key indicators such as employment and housing.”

Pulling down the overall number was a 9.3% plunge in building materials. That follows the expiration of a tax credit for homebuyers in April that spurred home sales.

Department store sales fell 1.8% while sales in the broader category of general merchandise stores fell 1.1%.

The Federal Reserve reported Thursday that households' net worth rose for the fourth consecutive quarter, but since then stock prices have been tumbling. Economists said it might not be until 2012 or 2013 at best before Americans' wealth returns to its pre-recession levels.

Last week, the International Council of Shopping Centers reported that its index for same-store sales increased 2.6% in May compared with last year. That followed a 0.8% April increase and a 9% surge in March.