Spending in Nevada expected to increase

WASHINGTON – Americans barely increased their spending at retail businesses in April and May, constrained by weak job creation and paltry wage increases.

A sharp drop in gasoline prices pulled down overall sales in both months by 0.2 percent, Commerce Department officials said Wednesday.

But excluding volatile gas station sales, retail sales grew only modestly in May and dipped in April. The report could lead economists to lower their outlooks for April-June economic growth.

In Nevada, however, the state’s retail association expects spending to continue to increase.

"We’ve seen continuous growth, and at least in sales tax revenue, we’ve been increasing," said Bryan Wachter, director of government affairs for the Retail Association of Nevada.

When looking at Nevada’s taxable sales for March, the last month for which figures are available, they were up 7.2 percent to $3.9 billion from $3.6 billion in March 2011. Although the state has experienced fluctuations in how much sales have increased, they’ve been consistently higher month-over-month since the recession, Wachter noted.

"We’re cautiously optimistic that sales will keep improving for Nevada," Wachter said.

He said sales tax figures should remain constant throughout the summer, with a slight increase in August when consumers spend on back-to-school items. From there, sales will continue pick up into the holiday shopping season.

As for Nevada-specific Father’s Day shopping, the Retail Association of Nevada expects spending to be up 10 percent over 2011’s average of $106 to $117 in 2012. Approximately $242 million will be spent by Nevadans in the name of Father’s Day.

Although "cautiously optimistic," Wachter did note that stalls in job creation and construction spending in Nevada could hamper sales in the state. Economists too, worry that consumer spending may weaken if hiring and pay doesn’t pick up.

gasoline price drop may benefit sales

The producer price index, which measures price changes before they reach the consumer, dropped 1 percent in May, the Labor Department said in a separate report. That reflected a 9 percent fall in wholesale gasoline prices.

The decline at the pump could bode well for consumers in the coming months, too. The average national price for a gallon of gasoline was $3.54 Wednesday – 40 cents cheaper than the year’s peak price in early April. However, the AAA fuel gauge reported noted the Las Vegas average was $3.74 on Thursday.

And while overall retail sales barely budged in May, Americans did spend more on big purchases.

Auto sales rose sharply, and sales of furniture and appliances also increased. That suggests consumers may already be seeing some benefit from lower gasoline prices.

"The continued fall in gasoline prices should support consumption by freeing up cash to be spent on other items," said Paul Dales, senior U.S. economist at Capital Economics. "So although real consumption growth looks set to slow in (the second quarter), we doubt it will grind to a complete halt."

The retail sales report is the government’s first look at consumer spending, which drives 70 percent of economic activity.

Total retail sales fell in May to $404.6 billion. That’s slightly below March’s record level of $406.2 billion and 21.6 percent higher than the recession low hit in March 2009.

Gas station sales fell 2.2 percent in May, accounting for most of the decline in retail sales. Excluding gas station sales, retail spending rose just 0.1 percent in May.

building supply sales down

Sales at building supply stores, which include Home Depot, fell 1.7 percent in May.

And general merchandise stores, a category that includes Wal-Mart and Target, fell for the second straight month.

Part of the decline in those categories may be payback for stronger spending at the start of the year. A mild winter encouraged some homeowners to get a head start on remodeling and landscaping projects, which normally take place in spring.

U.S. workers’ average hourly earnings have risen just 1.7 percent in the 12 months ended in May. That’s well below the pace of inflation during this period.

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