Consumers are spending cautiously in the face of still-high gasoline and grocery prices, restraining the economy’s growth, new government figures suggest.
But some relief could be on the way: Wholesale food prices dropped last month by the most in a year. And motorists are likely to face lower gasoline prices this summer. CEOs for the nation’s largest companies say they plan to step up hiring over the next six months.
Retail sales fell 0.2 percent in May, the Commerce Department said Tuesday. The first decline in nearly a year occurred mainly because Americans bought fewer cars.
The drop in auto sales was 2.9 percent, the sharpest drop in 15 months. But analysts said it was largely because of temporary factors: Buyers received fewer dealer incentives, and dealers ran short on popular fuel-efficient models.
Excluding the drop in car sales, retail sales rose 0.3 percent. That gain seemed to please investors, who were expecting broad declines because of high gas prices. The Dow Jones industrial average rose 123 points. Broader indexes also increased.
“The decline in headline retail sales during May can be chalked up to slumping auto sales,” said Alistair Bentley, an economist at TD Economics. “This was to be expected following the sharp rise in gas prices and the tsunami in Japan, and thus should not be interpreted as a dramatic swing in consumer sentiment.”
Other signs emerged that the economy could strengthen in the second half of the year — especially the prospect of lower prices at grocery stores and gas stations.
Food costs at the wholesale level fell by the most in a year, according to a government report on producer prices. Fruit and vegetable prices led the declines. Tomatoes plummeted 47 percent, the most since last June. Spinach prices dropped 48 percent, and watermelons fell 74 percent.
Gas prices at the wholesale level rose by the smallest amount in eight months. Consumers had been paying an average of nearly $4 for a gallon of gas in early May. On Monday, the national average was $3.70 a gallon, according to AAA. Still, that’s a dollar more than what consumers paid a year ago.
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