As high gasoline prices create stronger economic headwinds against U.S. consumers, many in Wall Street have remained worried that a drop-off in consumer spending could ensue if wholesale price increases are passed along.
When it comes to higher gas prices, consumers have a tendency to grow more weary and in response they act by altering their spending habits. During fiscal ’07, for example, the gas portion of consumers’ weekly spending ranged from 12 to 16 percent.
As gas prices continue to increase, even though for the past two weeks prices have been in a corrective mode, the number could rise to 18-19 percent. However, we have to keep in mind – that gasoline and other fuels account for only 4% of total consumer spending, as measured in real personal consumption expenditures.
Certainly, consumers continue spending in a conservative manner and many analysts had predicted a “gloomy May” in terms of retail sales numbers. Nevertheless, according to a report released today from the International Council of Shopping Centers – consumers stepped up their shopping.
U.S. chain store sales increased 3.0 percent for May on a year-over-year, same-store basis. Wholesale club sales were up 4.6 percent for the month, excluding fuel sales. Drug stores were up 3.2 percent and discounters saw sales jump 3 percent in May.
Apparel sales however, were weak during the month, with apparel specialty stores reporting an average 6.5 percent decline in same-store sales and department stores reporting an average 3.5 percent drop in sales.
Looking forward to June: sales are expected to be up 2.5-3% over the same month of the previous year. This will be helped by fuller distribution of the federal stimulus money.
Total sales rose 9.1% from a year ago. On average, May represents 8% of the total annual comparable store sales.