Retail Sales Rebound in May

Shoppers, after cutting back in April, opened their pocketbooks and wallets a bit wider in May, pushing up sales at the nation's retailers by 0.1 percent.

The tiny rise reported by the Commerce Department (search) Thursday came after consumers awoke from a shopping slumber that caused retail sales to drop by 0.3 percent in April, according to revised figures. That represented a deeper decline than the 0.1 percent decrease reported a month ago.

Shoppers actually exhibited more strength in May than the 0.1 percent rise suggests.

A sizable 4.3 percent drop in sales at gasoline stations reflected lower prices at the pump and restrained the overall growth in retail sales. When gasoline station sales are removed from consideration, retail sales rose a solid 0.4 percent in May, the government said.

Consumers, who have been the main force keeping the economy going, spent more freely in May, driving up sales of furniture, electronics and appliances, and clothing. They also treated themselves more by going out to restaurants and bars.

The 0.1 percent rise in retail sales was slightly stronger than the flat reading that economists were forecasting.

Low interest rates and a refinancing boom that has left people with extra cash and solid home values are some of the factors offsetting the negative forces of a sluggish job market, where the nation's unemployment rate climbed to a nine-year high of 6.1 percent in May.

In another report, the number of American workers filing new applications for unemployment benefits last week dropped by a seasonally adjusted 17,000 to 430,000, the Labor Department (search) said. Even with the drop, claims still remained above the 400,000 mark, a level that economists say points to a lackluster job market.

The more stable, four-week moving average of claims, which smooths out weekly fluctuations, meanwhile, rose to a four-week high last week of 433,750.

The Federal Reserve has held a key, short-term interest rate at a 41-year low of 1.25 percent since November, with the hope that such a low rate will motivate consumers and businesses to spend and invest more, helping to bolster economic growth.

Economists expect the Federal Reserve Board (search) to reduce short-term rates at its next meeting on June 24-25 by at least a quarter percentage point. That belief is based on concerns raised by Fed policy-makers that the country could face a destabilizing fall in prices-- something economists refer to as deflation. Though policy-makers are quick to say the chance of such an occurrence is remote, they said the Fed nonetheless must stand vigilant against even the threat of such a danger to the economy.

In May, sales of automobiles dipped by 0.2 percent, despite free-financing offers and other generous incentives. That compared with a 1.7 percent increase posted in April.

Excluding sales of automobiles, which tend to swing widely from month to month, retail sales edged up by 0.1 percent in May. When both sales of autos and gasoline are removed from the picture, retail sales rose a brisk 0.6 percent in May, the government said.

Sales at furniture stores rose 1.1 percent in May, up from a 0.5 percent increase the month before.

At electronics and appliance stores, sales went up 2.9 percent, an improvement from April's 0.8 percent advance.

Clothing store sales increased 1 percent, reserving some of April's 1.8 percent decline.

At department stores, sales went up 0.7 percent in May, compared with a 1.2 percent drop the month before.

Sales at bars and restaurants increased by 1.4 percent in May, an improvement from April's 0.4 percent decline. Beauty and health stores saw sales go up 0.4 percent in May, twice April's 0.2 percent rise.

Sales at building and garden supply stores were flat, after registering a 0.7 percent drop in April.