Retail Sales Fall More Than Expected in May

Retail sales (search) fell a surprisingly large 0.5 percent in May, the biggest decline in nearly a year, as Americans bought fewer cars and cut back on clothing purchases, a government report showed Tuesday.

The drop in retail sales was the largest since a matching decline last June, the Commerce Department (search) said, and exceeded the 0.2 percent drop forecast by analysts. The decline was the first since last August and came on the heels of an upwardly revised 1.5 percent gain in April.

Excluding autos, which can swing widely from month to month, retail sales dropped 0.2 percent after an upwardly revised 1.4 percent jump in April. It was the first drop ex-autos since April of last year.

While the Federal Reserve (search) has expressed confidence that an energy price-driven soft stretch earlier this year will prove short-lived, the weak retail sales number may be a sign U.S. consumer spending — which fuels about two-thirds of economic output — is faltering.

However, a report out earlier on Tuesday showed a pick-up in chain store sales last week.

The Commerce Department said May motor vehicle and parts outlays fell by 1.6 percent, the biggest decline since a 2.6 percent slide in January.

Other types of spending shrank as well. Non-store retailers, which include electronic and other forms of mail-order shopping, saw sales decline by 1.1 percent, the biggest drop since a 2.2 percent tumble in April 2003.

Purchases of clothing and accessories fell by 0.8 percent.

Sales at department stores and other general merchandisers fell 0.1 percent, while gasoline sales fell by 1.6 percent.