Retail sales rise by paltry 0.1% as shoppers feel pinch of high inflation
Retail sales barely rose last month as Americans burdened by persistently sticky rates of inflation increasingly pull back on spending.
Data released on Tuesday by the Commerce Department showed that the value of retail purchases rose 0.1% in May — below analyst estimates of 0.2%.
Retail sales for the previous month were revised downwar🦋d to 0.2%.
Of the 13 categories listed by the Commerce Depar𒊎tment, five of them showed declines as gasoline prices dropped and furniture stores hawked Memorial Day sales, according to government data.
The lackluster numbers show𝕴 a marked downturn in consumer spending after more robust figures earlier this year. Economists now ex🍸pect spending to continue at a moderate pace as US shoppers grapple with stubborn inflation and a weakening job market.
“With … consumer confidence plummeting again, maybe households aren’t quite as impervious to higher interest rates as we were beginning to believe,” Paul Ashworth, chief North America economist at Capital Economics, said in a note to clients.
When excluding gasoline, retail sales in May r♍ose 0.3🍌%. Year over year, retail sales in May were up 2.3%.
The sluggish ret💙ail sales put a damper on Wall Street as the main ꦇindexes reported slight gains.
The Dow Jones Industrial Average was up 0.03% at around nꦰܫoon on Tuesday while the S&P 500 was up 0.12%.
The tech-centric Nasdaq was trading down 0.11% .
Consumer spending accounts for some two-thirds of all economic activity so any signs of a slowdown could portend a possible decline in growth — heightening risk of a recession.
Part of the weakness was because of lower gasoline prices, which weighed on receipts at service stations.
Gas station purchases were down 2.2% in Mayᩚᩚᩚᩚᩚᩚᩚᩚᩚ𒀱ᩚᩚᩚ compared to the previous month, though sports goods, music and book stores reported a 2.8% increase in sales.
The national average price for a gallon of unleaded gasoline was $3🐽.45 as of Monday. A month ago, it was $3.59, AAA said.
Retail purchases 🌱at online outlets were up 0.8% while bars and restaurants reporte🔯d a 0.4% drop.
Retail sales at furni🌊ture and home furnishing outlets were down 1.1%.
Sales at clothing and accessory stores rose 0.9%, while electronics and appliance stores p🎶os🐼ted a 0.4% gain.
But business at buildin𒁃g material and garden 🍸supplies fell 0.8%.
The Federal Reserve has aggressively hiked interest rates over the course of the last two years in an attempt to engineer a “soft landing” — bringing down inflation without tipping the economy into a recession.
Inflation rose at 3.3% year-overꦏ-year last month — slightly down from the 3.4% headline rate from April.
The latest figures boosted hopes that the Fed could🐷 begin cutting rates later this year.
Core inflationಌ, which excludes volatile food and energy prices, rose 0.2% — also slightly lower than expected.
That was down from 0.3% the previous month and was the smalles𓄧t incrಞease since October.
Last week, the Fed announced it was keeping rates steady at roughly 5.3%, its highest lܫeve🍨l in 23 years, where it has stood since July.
Economists said that Tuesday’s Commerce Department report reflected an increasingly cautious consumer.
But they point to a silver lining: a weaker-than-expected retail sales report increases the likelihood that the Fed will start to cut interest rates in a few months.
“Consumer ꦅspending is cooling in a fairly orderly fashion,” said Jeffrey Roach, chief economist for LPL Financial in Charlotte, North Carolina.
But he added, “So far, the economy could pull off a soft landing, especially if the Fed is quick to adjust policy as conditi💟ons change.”
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