US retail sales grew only marginally in May. Retail sales edged forward in May amid renewed fear of full-blown recession. With a lower than expected gain of only 0.1% for the month, consumer confidence continues to weaken as purse strings are tightened. As retail sales flounder and unemployment increases, it would appear that the worst might not yet be over for the struggling US economy.

US retail sales rose 0.1% in May to a seasonally adjusted $279.96 billion, below economist expectations. However, despite renewed fear of recession, the marginal growth follows on from an unusually strong April, with its 1.4% gain. Could May figures simply represent an anomalous leveling off?

Excluding vehicle sales, retail revenue grew 0.3%, slightly less than expected and a long way short of the 1.1 percent rise in April. Automobile sales fell 0.7%, having risen 2.3% in April.

The key drivers behind May's rise in retail sales are a 1.4% gain in gasoline sales, a 1.2% rise in furniture sales and a 1.5% rise in sporting-goods sales. These fit with seasonal buying behavior as people gas up their cars and spruce up their homes and wardrobes in preparation for the summertime.

However, the data also revealed a 1% fall in retail clothing sales and a 0.6% fall in sales of building materials and garden supplies. These are fairly significant indications that people are indeed becoming more cautious of their spending as economic uncertainty deepens.

Adding fuel to the fire, earlier in June the Labor Department reported the highest number of new weekly unemployment claims in over eight-and-a-half years, 432,000. The rise caught analysts, who were expecting a small drop in unemployment claims, off guard.

With retail sales floundering and unemployment increasing it would appear that the worst might not yet be over for the struggling US economy.

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