- The Washington Times - Friday, June 8, 2007

NEW YORK (AP) — Americans shopped hesitantly last month, giving retailers some relief from a dismal showing in April but still raising questions about how strong consumer spending will be in the months ahead.

As the nation’s merchants reported results yesterday, it was clear that higher gas prices and the slumping housing market are affecting how consumers spend their earnings. Sales were disappointing in a cross-section of the industry, including Wal-Mart Stores Inc., Macy’s Inc. and Abercrombie & Fitch Co.

“This should have been a stronger performance because there should have been some pent-up demand. The weather was even nice,” said John Morris, managing director at Wachovia Securities. “To me, this was a real litmus test, and retailers failed that litmus test. It’s telling me where the consumer stands, and the consumer is on weak legs.”

The ICSC-UBS sales tally of 51 stores rose 2.5 percent in May, down from 4.5 percent a year earlier but a sharp improvement from April’s revised 1.9 percent drop. The tally is based on sales at stores open at least a year, considered a key indicator of a retailer’s health.

“It’s a slowing trend that we have been seeing since February,” said Michael P. Niemira, chief economist at the International Council of Shopping Centers. From February through May, the index averaged a 2.2 percent same-store sales gain, compared with the 4.1 percent average a year earlier.

Analysts are now closely monitoring sales in June, the second-most important month on the retail calendar behind December. But many think the modest spending pace will continue through the fall season. And with no hot apparel trends emerging, Mr. Morris thinks consumers have few reasons to buy. He said sluggish demand could result in discounting increasing by 10 percent later this month from the current 5 percent at the 20 mall-based apparel stores he follows, compared with a year ago.

May’s mixed performance follows the retail industry’s worst performance ever in April. While one-time factors like an early Easter and rainy weather hurt April sales, business was so bad that it fed worries that higher gas prices and a weaker housing market are eating away at consumer spending.

May’s results benefited from warmer weather and the Memorial Day shopping weekend, which was not included in the year-ago results. But consumers also faced rising gasoline prices that topped $3.20 a gallon before leveling off.

For now, however, the cutbacks in spending appear to be contained amid a healthy job market and solid wage gains. The latest figures on unemployment benefits released yesterday by the Labor Department underscored a solid job market. The government reported that the number of Americans filing claims for jobless benefits totaled 309,000 last week, down by 1,000 from the previous week.

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