NEW YORK WHOLESALE

WASHINGTON (AP) — Retail sales fell in April and May, pulled down by a sharp drop in gas prices.

But even after excluding volatile gasoline sales, consumers barely increased their spending.

The Commerce Department said Wednesday that retail sales dipped 0.2% in May. That followed a revised 0.2% decline April. The back-to-back declines were the first in two years.

The weakness reflected a 2.2% plunge in gasoline station sales. Still, excluding gas station sales, retail spending rose just 0.1% in May. And it dropped 0.1% in April. That left retail spending roughly flat outside of gas sales for the two months, a sign that slower job growth and paltry wage increases may be leading consumers to pull back on spending.

Another report said companies increased their stockpiles at a faster rate in April, despite modest growth in sales.

The Commerce Department says business stockpiles grew 0.4% in April, slightly better than March's pace. When businesses step up restocking, that generally leads to increased factory production and higher economic growth.

Total inventories rose to $1.58 trillion in April, 19.7% higher than the low in September 2009, when businesses were slashing inventories in response to the deep recession.

A third report Wednesday said cheaper gas pushed down the government's measure of wholesale prices by 1% in May, biggest drop in nearly 3 years.

The steep drop in gasoline costs drove down a measure of wholesale prices in May by the most since July 2009. But outside the food and energy categories, prices increased moderately.

The Labor Department says that the producer price index fell 1% in May, after dropping 0.2% in April. Gasoline prices dropped nearly 9%, the most in almost three years. Food costs also fell.

The index measures price changes before they reach the consumer. Excluding food and energy, the so-called "core" index increased 0.2%, the same as in April.

In the past 12 months, wholesale prices are up only 0.7%, the smallest gain since October 2009. The core index has risen 2.7% in the same period. That's the same pace as last month.

The retail sales report said Americans did spend more in May on big purchases. Sales of cars, furniture and appliances all increased.

And lower gas prices could give consumers more to spend in coming months on restaurant meals, clothes, appliances and other discretionary purchases that drive growth.

Gas prices have tumbled since peaking April 6. On Tuesday, the average nationally price for a gallon of gas averaged $3.54, according to AAA. That's down 19 cents from a month earlier.

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

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

But economists are worried that consumer spending may weaken if income growth does not revive.

Workers' average hourly earnings have risen just 1.7% in the 12 months ended in May. That's well below the pace of inflation during this period.

And job growth has slowed since the start of the year. Employers added 226,000 jobs on average during the first three months of the year; they have added an average of 73,000 jobs a month since April.

If job growth does not revive, that could act as a drag on consumer spending in coming months.

In the January-March quarter, overall economic growth slowed to an annual rate of 1.9%, down from a 3% rate of increase in the October-December period.

The strength in the first three months of this year was led by the fastest growth in consumer spending in more than a year.

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The first one out was Wayne Rooney when England's players returned to the Hutnik stadium, on the outskirts of Krakow, and back to work. In fact, Rooney was so eager to start he had a bag over his shoulder, containing all the balls, as he made his way on to the pitch. Soon afterwards, he was looking back down the tunnel to see what was holding up everyone else. His new haircut, a grade-one short-back-and-sides, looked like the act of someone who means business.

It was a short session – at least, for the players who had started against France in the heat and humidity of the Donbass Arena. Hodgson had set up a series of attack-versus-defence drills but it was the support cast – a number that temporarily includes Rooney – who stayed out in the drizzle.

Everyone else was already back inside after 15 minutes.

Hodgson, in other words, will have only one proper training session to put in place his strategy for the game against Sweden in Kiev on Friday and a slight shift in tactics from the France match, with greater emphasis on getting behind the opposition defence and showing more composure in attacking positions. Six of the last seven goals Sweden have conceded have come from headers and Hodgson particularly wants to work on the team's delivery from wide positions. Yet there was no crossing practice for James Milner and Alex Oxlade-Chamberlain, or any routines specifically planned to bringing Ashley Young more into the game. Not on this occasion anyway. As much as Hodgson must be itching to work with his players, the clear emphasis was on keeping the players free of fatigue.

His concerns are obvious when so many of his predecessors have cited burnout for previous tournament failures and the current system is built around two players, Steven Gerrard and Scott Parker, whose fitness needs carefully monitoring. Uefa's number-crunchers calculated the team ran a total of 104.8km – or 65.1 miles – in the punishing conditions of their opening match. To reach the final, England would have to play six games in 20 days as well as embarking on 12 different flights because of the decision to be based in a different country to their matches. Hodgson and the FA's small army of sports scientists believe they have little option but to give the players the cotton-wool treatment.

It is a gruelling schedule and Hodgson made the point that his concerns are not restricted to Gerrard and Parker, 32 and 31 respectively. Milner, for instance, ran 1.4km further than any other England player in Donetsk and though Hodgson indicated there would not be changes against Sweden, or certainly "wholesale changes", there was an indication he would give more consideration to resting players against Ukraine on Tuesday. The alternative, he fears, is to ask too much from one set of players. "Age doesn't bother me. When you go into the third group game you're going to be concerned for all your players, not just Gerrard and Parker," Hodgson said. "You've got to be concerned for them all, whatever age they are, because three games played in the Ukraine, in heat, takes it out of everybody."

Hodgson also pointed out that Sweden have "players who are considerably older" – England, in fact, have the third youngest squad in the tournament – but when it comes to Gerrard and Parker the question is not so much about their age but the fact they came into this tournament with injury issues and the alternatives, to put it bluntly, do no overly inspire confidence.

Jordan Henderson replaced Parker after he started to suffer from cramp against France. Otherwise, Hodgson talked about the possibility moving Milner, now established as first-choice on the right of midfield, into the centre or bringing in Phil Jagielka or Phil Jones, two players in the squad primarily as defenders.

The question that has still never been satisfactorily answered is why the FA decided to stick to its original plan and stay in Krakow even after the draw left them facing at least two 1,000-mile round trips to Donetsk and one to Kiev.

Hodgson, however, has never indicated any unhappiness with a decision taken long before his appointment. "I like being in Krakow and I'm convinced our performances will not suffer as a result." David Bernstein, the FA's chairman, will also repel any possible criticisms, pointing out the players are flying in luxury and that it will be considerably worse at the World Cup in Brazil in 2014.

All the same, England's hotel for the first of their visits to Donetsk was next to the stadium and after a match as gruelling as the France one, there is a clear disadvantage in long-distance travel. The French, in contrast, based themselves in Donetsk. "The team that travels less on the plane and road will get more recuperation time," their manager, Laurent Blanc, explained. "England are in Krakow, so they travel a lot. I know there are some huge distances. So when you have games that end at 9pm and if you have to go back to the camp, what time do you go to bed?"

England's game against Sweden will not actually finish until shortly before midnight local time. In other words, it could be 3am or later before the players are back in their hotel. After that, the cycle is a day of rest, then one of light training and then back in the air again. There is no let-up and for Hodgson, trying to implement his ideas, that makes it a delicate balancing act.

Wholesale prices in the U.S. dropped in May by the most since July 2009 as costs of energy and food decreased, easing pressure on companies to pass expenses to customers.

The producer price index fell 1 percent, more than forecast, following a 0.2 percent decrease the prior month, Labor Department figures showed today in Washington. Economists projected a 0.6 percent decline, according to the median estimate in a Bloomberg News survey. The core measure, which excludes volatile food and energy prices, climbed 0.2 percent for a second month.

Slower global growth that’s tempering demand for raw materials may allow producers to hold down costs and preserve margins, a benefit to consumers facing weaker income gains. Limited inflation also provides Federal Reserve officials with more room to stimulate the U.S. expansion.

“The signs are that inflation pressures are dissipating fairly quickly,” said Jeremy Lawson, a senior U.S. economist at BNP Paribas in New York. “From a producer perspective, it means import costs are low so they can maintain relatively healthy margins. For consumers, it provides some relief, adds to purchasing power, at a time where their incomes are being constrained by very weak wage growth.”

The median estimate for the producer price index was based on forecasts from 76 economists. Projections ranged from a decrease of 1.5 percent to an increase of 0.3 percent. Core wholesale prices were projected to rise 0.2 percent for a second month.

Retail Sales

Retail sales fell in May for a second month as slower employment and subdued wage gains damped demand, another report today showed. The 0.2 percent decrease followed a similar drop in April that was previously reported as a gain, Commerce Department figures showed today in Washington.

Stock-index futures remained lower after the figures. The contract on the Standard & Poor’s 500 Index expiring in September fell 0.6 percent to 1,312.7 at 8:50 a.m. in New York.

In the 12 months ended May 2012, companies paid 0.7 percent more for materials, the smallest gain since October 2009. The core price index increased 2.7 percent in the same period.

The decline in the overall index was led by a 4.3 percent slump in energy prices that was the biggest since March 2009. The cost of liquefied petroleum fell the most since December 2009, and gasoline prices dropped 8.9 percent, the report showed.

Cheaper Food

The cost of food decreased 0.6 percent, the most this year, reflecting a drop in prices of meat, fruits and soft drinks.

About 25 percent of the increase in core prices in May was attributable to a 0.7 percent gain in the cost of pharmaceutical preparations, the report said.

The price of passenger cars rose 0.2 percent last month and was up 1.2 percent from the prior 12 months.

Prices of capital goods climbed 0.1 percent last month after a 0.2 percent rise in April.

Price pressures eased all the way down the production line, according to today’s data. The cost of intermediate goods dropped 0.8 percent, the most since October. Prices for crude materials, those used at the earliest stage of production, declined 3.2 percent.

The waning of raw material costs is good news for businesses hesitant to raise prices while consumers face an unemployment rate of 8.2 percent. The Thomson Reuters/Jefferies CRB commodity index has fallen 17 percent through yesterday from a five-month high in February.

Raw Materials

Diminished demand for commodities from abroad will probably help keep inflation in check. The expansion in the 17-nation euro region stagnated in the first quarter from the same time in 2011, government data show.

“Raw material costs we do see moderating this year,” said David Meline, chief financial officer of 3M Co. (MMM) (MMM) The St. Paul, Minnesota-based maker of Post-it Notes and fuel system tune-up kits expects input price inflation of 1 percent to 2 percent in 2012 compared with 4 percent last year, Meline said during a June 5 investor conference.

The outlook for inflation is “subdued,” and price gains will probably remain at or slightly below the 2 percent level that’s in line with central bank policy makers’ goal of stable prices and maximum employment, Fed Chairman Ben S. Bernanke told the Joint Economic Committee of Congress last week. Still-high unemployment and retreating oil and gas prices “should continue to restrain inflationary pressures,” he said.

Fed Meeting

The Federal Open Market Committee, which sets the course of central bank policy, meets next week. The group may address a cooling U.S. expansion, the weakest job growth in a year and a widening financial crisis in Europe.

Producer prices are one of three monthly inflation gauges reported by the Labor Department. The consumer price index, due tomorrow, is projected to drop 0.2 percent in May after little change the prior month, according to the median estimate in the Bloomberg survey. The cost of goods imported into the U.S. fell 1 percent last month, reflecting lower costs for food and fuel, Labor Department data showed yesterday.

To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net