US retail sales barely rose in May and prior months were revised lower, pointing to greater financial strain among consumers.
The value of retail purchases, unadjusted for inflation, increased 0.1% after an downwardly revised 0.2% drop in the prior month, Commerce Department data showed Tuesday. Excluding gasoline, sales rose 0.3%.
Of the 13 categories tracked by the Commerce Department, five showed declines as gasoline prices were cheaper in the month and furniture outlets offered discounts for Memorial Day.
The figures underscore a notable downshift in consumer spending after stronger readings earlier in the year. Economists expect a moderate pace of spending going forward as Americans exercise greater prudence given persistent inflation, a gradually cooling job market and emerging signs of financial stress.
“With services consumption growth slowing in recent months and 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.
Data out last week showed US consumer and producer prices were both softer than expected in May, which should help bolster the Federal Reserve’s confidence that they can lower interest rates soon. In keeping rates steady last week, Chair Jerome Powell said consumer spending is still growing solidly and that the household sector is in “pretty good shape.”
Treasury yields declined as the report signaled some softening in the economy.
The retail report showed so-called control-group sales — which are used to calculate gross domestic product — climbed 0.4% in May. It fell 0.5% in the prior month, which was the most in about a year. The measure excludes food services, auto dealers, building materials stores and gasoline stations.
Separate data on consumer borrowing from earlier this month showed a pullback in credit-card balances for the the first time in three years as households grappled with costlier debt, and delinquencies have continued to rise. That’s taking a toll on sentiment as well.
Retail figures largely reflect purchases of goods, which comprise a relatively narrow share of overall consumer outlays. Data due later this month will provide more details on inflation-adjusted spending on goods and services in May.
Spending at restaurants and bars, the only service-sector category of Tuesday’s report, declined 0.4%, the most since January.
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