Retail Sales Decline; Jobless Claims Rise

WASHINGTON — Sales at U.S. retailers fell for the third month in a row in May, and first-time claims for unemployment benefits rose last week--unexpected developments reported Thursday that show the economy has shifted into a lower gear.

Retail sales fell 0.1% last month as purchases of autos and other durable goods slid. That followed revised declines of 0.9% in April sales and 0.3% in March sales--both worse than previously reported.

The last time retail sales declined for three straight months was September through November 1981, a Commerce Department spokesman said--just as the worst recession in the last two decades was starting.

The sales slump may be a consequence of consumers owing too much money.

“There is a tendency to buy a lot, build up your credit card bills and take a rest for a while and pay those bills,” said Ira Silver, chief economist at J.C. Penney Co.

Stocks and bonds surged as investors interpreted the news to mean the economy will continue chugging along but at a pace that isn’t likely to push Federal Reserve Board policymakers to raise lending rates.

The weak numbers appear to “close the door” on another Fed rate increase, said David Resler, chief economist at Nomura Securities in New York, who said it’s likely the economy is expanding at no more than a 1.5% annual rate in the second quarter following the first quarter’s torrid 5.8% pace.

Still, Treasury Secretary Robert E. Rubin threw a positive light on the reports. He said “the most likely [scenario] is a continuation of good growth and low inflation.”

Signs of a slowing economy could be found in the Labor Department’s report that first-time jobless claims rose by 1,000 in the week ended June 7 to a seasonally adjusted 339,000, the highest level in five weeks.

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Retail Sales

In billions of dollars, seasonally adjusted:

May: $210.3

(Please see newspaper for full chart information)

Source: Commerce Department