U.S. retailers are expected to show a moderate increase in May sales, as high gas prices likely tempered consumer demand for summer clothing and other discretionary items.

Analysts on average are expecting a 5.3 percent increase in May sales at stores open at least a year, according to Thomson Reuters data. That compares with gains of 8.9 percent in April, when sales were fueled by a late Easter holiday, and 2.6 percent in May 2010, when the economy was still fitful and many experts feared a double-dip recession.

The easy comparison with last year could mean a higher number this year, said Frank Badillo, a senior economist with Kantar Retail, a research and consulting firm.

But the big issue is to what extent will the jump in fuel prices continue to take the edge off of growth, Badillo said. So far we haven't seen a lot of strong evidence that it's having an impact, but as we move into several months of high fuel prices, I think we'll start to see some effects in May.

U.S. gasoline prices fell to an average of $3.90 per gallon in the latest Lundberg Survey, which tracks prices across the country. Gas hit $4 per gallon earlier in May and has been above $3 per gallon for most of the year, due in part to unrest in the Middle East.

High fuel prices affect shopping behavior. The longer those fuel prices persist, it's more likely to affect the household budget as well, Badillo said.

U.S. consumers turned more pessimistic in May, according to an index of consumer sentiment, while home prices fell back below crisis-era lows in March, pointing to an economy that continues to struggle.

MIXED BAG

May is not often a big month for shopping, since it falls after the Easter holiday and before the back-to-school season. Retailers have also been grappling with a slow job recovery that has kept spending at bay, especially for lower-income households.

What is more, the weather across much of the country was cool and rainy, said Nomura analyst Paul Lejuez, noting that many retailers also blamed bad weather for lackluster sales in the first quarter.

The biggest May sales increase, 7.3 percent, is expected from discount stores that appeal to consumers on a tight budget, such as Costco Wholesale Corp and Target Corp , according to Thomson Reuters.

Clothing companies such as Gap Inc , TJX Cos Inc and Limited Brands Inc are expected to turn in the smallest gain, of 2.5 percent.

Lejuez said TJX, Chico's FAS Inc and Ann Taylor parent Ann Inc had indicated that May was off to a strong start, while Pacific Sunwear of California Inc

, Aeropostale Inc and Urban Outfitters Inc saw no change in generally weak trends.

Though they have not commented on May trends, Lejuez said Limited and Ross Stores Inc probably performed well, while Gap was likely weak.

Richard Hastings, a consumer strategist at Global Hunter Securities, said retailers that cater to lower-income consumers are expected to struggle throughout the year, since their customers are more affected by unemployment and higher food and fuel prices than a recovering stock market.

America has an extensive pocket of vulnerability to inflation ... that causes severe bifurcation in the retailer results, Hastings said. That's what we're going to continue to see for the rest of the year.

(Reporting by Martinne Geller; editing by Richard Chang and Andre Grenon)

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