May sees jump in retail sales

By Martin Crutsinger

WASHINGTON — Retail sales jumped by the largest amount in six months in May as 57 million economic stimulus payments helped offset the headwinds buffeting consumers.

The Commerce Department reported Thursday that retail sales soared 1 percent last month, the biggest increase since November. A wide variety of retailers enjoyed a good month, including the biggest increase at department stores and other general merchandise stores in a year.

The May increase was double what economists had been expecting and indicated that the economy is getting a major boost from the $50 billion in economic stimulus payments the government sent out in May, just under half of the total stimulus aimed at consumers.

The Bush administration is hoping the stimulus payments will help offset the gloom from a prolonged slump in housing, a severe credit crisis, soaring energy bills and rising layoff notices and help the country avert a deep recession.

Highlighting the pressures on the job market, the Labor Department reported Thursday that new applications for jobless benefits rose by 25,000 last week to 384,000, the highest level since late March.

It was a much bigger increase than analysts had been expecting. Last week, the government reported that the unemployment rate jumped to 5.5 percent in May, up from 5 percent in April. That was the biggest one-month rise in 22 years.

In a third report, the Commerce Department said that business inventories grew by 0.5 percent in April, more than double the 0.2 percent rise in March and the best showing since inventories rose by 1 percent in January.

Analysts were surprised by the solid increase in retail sales and noted that sales in April were also revised to show a respectable gain of 0.4 percent, instead of the original estimate that sales had fallen by 0.2 percent.

“Recession? What recession?” asked Joel Naroff, chief economist at Naroff Economic Advisors. “Spending in April and May was solid in just about every category.”