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General merch. sales hit freefall in May

Retail sales at the general-merchandise stores hit what can only be termed as a freefall in May.

As reported by the U.S. Department of Commerce, May sales at department stores and mass merchants dropped 2.3 percent from the April total, to $19.5 billion. (The huge disparity between these totals and reports from previous months comes from the Commerce Department's switch to the North American Industry Classification System; prior to June 1, Commerce had used the Standard Industrial Classification system.)

The general-merchandise result was by far the most dramatic in the Commerce report. Overall, U.S. retail sales in May were $291.3 billion, up 0.1 percent from the April sales figure.

The general-merchandise dropoff was also in line with the previous week's report on same-store sales from the major chains. About half of the store chains tracked by Home Textiles Today reported comp-store declines between May of this year and May of 2000.

As Dana Cohen, retail analyst with Banc of America Securities, put it, "The issue of the decelerating consumer continues to unfold." Cohen pointed out, in addition, that May is historically a key retail month with largely full-priced selling; based on store visits, however, "some companies were a little more promotional than usual."

Michael Niemira, analyst with Bank of Tokyo Mitsubishi, observed the consistency between both the chain reports and the Commerce data, as well as weak sales reports by the auto manufacturers (the auto sector in the Commerce report declined 0.7 percent last month, to $70.7 billion). "This May retail sales report does nothing to change our longer-run view…that there is a second leg of the consumer slowdown likely to develop by summer," Niemira said.

Even the National Retail Federation, normally a sunny-side-of-the-street observer of its members' business, admitted that May sales were "listless."

"We expect sales to improve in the coming months as the economy begins to pick up steam, and better weather stimulates seasonal merchandise," said NRF's chief economist, Rosalind Wells. The Bush administration tax rebates and the Federal Reserve's interest-rate cuts would also boost the stores, Wells stated.

Agreeing with this view, Sal Guatieri, senior economist with the Bank of Montreal, said the Commerce report "suggests that consumer spending, though slowing in May, remains healthy."

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