Analysts Expect May Sales Decline

Economists closely monitor consumer spending because it accounts for about 70 percent of U.S. economic activity. And analysts say there may have been a fundamental shift in consumer spending habits.

"We're moving from a time of irrational credit and debt demand spending to recession frugality, similar to what people's grandparents did during the Great Depression of the 1930s," said retail consultant Burt Flickinger III, managing director of Strategic Resource Group.

In fact, The Commerce Department reported Monday that Americans' personal savings rate jumped to 5.7 percent in April, the highest since February 1995. Consumer spending dipped 0.1 percent in April. That was slightly less than the 0.2 percent reduction economists were expecting, although it meant consumers are still limiting spending.

In response to the consumer spending drop-off, retailers have cut their expenses and reduced inventory and head count. And in some cases they brought in new management.

The belt tightening has helped their earnings. Many retailers reported better first-quarter results than expected — or at least earnings that matched analyst expectations — despite continued sales declines.

Wal-Mart Stores Inc., the world's largest retailer, in May posted flat first-quarter earnings, in line with expectations as sales edged down less than 1 percent. The Bentonville, Ark.-based retailer has stopped issuing monthly same-store sales releases.