NEW YORK — Shoppers are showing signs of pulling back on spending on discretionary items like clothing and home goods as gasoline and groceries eat up more of their paychecks.
Those pressures led many retailers on Thursday to report only modest revenue increases in May, the latest sign of t
he economy hitting a soft patch.
Most of the spring, consumers seemed to shrug off rising prices. Now, gasoline at more than $1 per gallon more than last year and higher grocery bills are “finally taking a bite and affecting sales,” said Ken Perkins, president of research firm Retail Metrics. “It definitely raises the caution flag going into the summer.”
Revenue rose 5.4 percent overall among 27 retailers at stores open at least a year, according to a preliminary tally by the International Council of Shopping Centers. But that was skewed by the strong positive effect gas price inflation had on retailers that sell gas like Costco Wholesale and BJ’s Warehouse Club. Excluding gas, retail revenue rose 3.7 percent.
That is consistent with projections of a 3 percent to 4 percent rise, said Mike Niemira ICSC chief economist and director of research. But that number, while relatively strong, is very uneven.
“On the surface, the numbers look pretty good. Excluding fuel, it isn’t bad underlying performance,” Niemira said. “But it is being driven by a very narrow set of retailers.”
Luxury stores are performing much better than stores that cater to middle- and lower-end consumers.
The figures are based on revenue from stores open at least one year, which is considered a key indicator of a retailer’s health because it excludes results from stores opened or closed during the year.
Niemira expects the June revenue figure to rise 4 percent to 5 percent, or 3 percent to 4 percent excluding fuel
The retail figures follow disappointing reports on auto sales, manufacturing, hiring and construction spending on Wednesday. The Dow Jones industrial average skidded 280 points Wednesday, losing more than a quarter of the year’s gains, on rising economic fears.
Consumer spending is closely watched because it accounts for about 70 percent of U.S. economic activity and is critical for a strong economy.
Of 24 retailers, about 60 percent missed expectations and 40 percent beat expectations, according to Thomson Reuters. The reports don’t include Wal-Mart Stores Inc., the world’s largest retailer.
“Our guests continue to shop cautiously in light of higher energy costs and inflationary pressures on their household budgets,” Target Corp. CEO Gregg Steinhafel said.
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