Total retail sales dropped by 0.2% in May as compared to April 2012 according to the Census Bureau’s advanced monthly release. This number may not be as negative as it appears at the first glance. In the first place it is 5.3% above May 2011 which is not all that bad. However, the detail analysis of the components of this number may shed more light on the concept.

The largest decline of components of retail sales was a 2.2% drop in expenditures on gasoline in May. Interestingly enough, this does not mean that we have purchased fewer gallons of gas in May compared to April. That is because the average price of gasoline dropped by 4.3% between the two months (according to the DOE), thus despite the drop in amount of payment for gasoline, we probably purchased
more gallons in May than we did in April.

Building material & garden equipment category, however, shows a significant drop of 1.7% between the two months. This is a leading indicator for the housing market. And it indicates that the housing sector is still far from recovery.

Further analysis of the details of Retail Sales shows that purchases of motor vehicles, electronic & appliances, clothing and particularly, the nonstore (Internet) retail purchases has increased significantly. All-in-all, while the overall May retail sales numbers dropped below expectations, in actuality this indicator was positive for May. Despite a significant drop in the building material purchases, it showed growth, particularly in the discretionary expenditure categories.