Americans Close Their Wallets
American shoppers curbed their spending in May, sending retail sales nationwide down by a bigger-than-expected 0.3 percent, marking the second month in a row in which retail sales have fallen.
The Commerce Department reported Tuesday that retail sales nationwide fell to a seasonally adjusted $266 billion last month, the first back-to-back decline since July and August of 1998.
A big drop in sales at hardware, building and garden supply stores led the decline.
Many analysts were expecting retail sales to actually go up in May. They were predicting a tiny increase of 0.1 percent.
In April, retail sales fell 0.6 percent, much weaker than the government estimated one month ago. Economists blamed that decline on dreary weather, stock market volatility and rising interest rates.
The Federal Reserve has bumped up short-term interest rates six times since last June. The Fed raised rates in an attempt to slow the speeding economy and its main engine, consumer spending, which accounts for two-thirds of all economic activity.
Those rate increases are designed to make borrowing more expensive and thus cool demand for big-ticket items such as cars and homes, a move that would help keep inflation from escalating.
Economists have offered conflicting opinions on whether or not the Fed will need to boost rates again when it meets later this month.
Stock market volatility is expected t continue until investors have a clearer idea of what the Fed when it meets in June.
CBS MarketWatch Correspondent Susan McGinnis reports that investors remain a bit jittery about this market, reluctant to do any major buying in a week filled with economic numbers, and a Federal Reserve interest rate meeting on the way later this month.
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