These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:
For the second month in a row, retail sales pulled back in May.
The private sector continues to struggle from weak demand, the economy is clearly slowing, and the pace of job creation will likely stay lethargic through the summer.
In May, lower gasoline prices did pull down retail spending but sales of consumer basics, such as groceries, health and personal care products, and general merchandise sold in department and variety stores, were down. Restaurants and bars saw a drop too. Overall, retail sales were down by 0.2% in both April and May.
Regarding the broader economy, flagging retail sales in April and May should be evaluated alongside stagnant wages for the last three months, falling productivity and factory orders, and declining prices reported by many manufacturers and service establishments.
Businesses are slashing prices to maintain volume, cutting back on new orders and likely have more workers than they need. Consumers are trimming revolving credit and becoming more cautious. Overall, if spending does not turn upward in June and July, the economy is headed for a period of contraction: negative growth and a mild recession.
Particularly alarming, these data do not bear the full weight of the slowdown in Europe, which will grip the U.S. economy more significantly in the summer months.
At the very best, economic growth will remain subpar and new job creation anemic, and the private sector continues to struggle. Layoffs will increase and unemployment will rise unless more adults quit the labor force.
