May Retail Sales Growth Misses Expectations


Retail sales in May grew at a slower pace than anticipated, impacted by high interest rates and inflation. Sales increased by 0.1%, falling short of the 0.3% economists had forecast. Revised data from the Commerce Department showed a 0.2% decline in April.

Excluding autos and gas, retail sales also rose by 0.1%, below the expected 0.4% increase but better than April’s 0.3% decline.

Paul Ashworth, Chief North America Economist at Capital Economics, remarked that the latest retail sales figures indicate that “consumers are struggling a little.” He added, “The soft May retail sales data support our view that, after a disappointing first quarter, GDP growth remains lackluster in the second quarter too.”

The report revealed that gasoline stations experienced the largest decline, with sales dropping 2.2% from the previous month. Sales at furniture and home stores decreased by 1.1%, while sporting goods and hobby stores saw the most significant gains, with sales rising 2.8%.

Michael Pearce, Deputy Chief US Economist at Oxford Economics, noted, “Consumer spending is slowing because real income growth is moderating and some consumers are becoming credit constrained amid elevated interest rates and increased credit card usage.”

Some analysts viewed the data more optimistically. The retail sales control group, which excludes volatile categories and impacts the quarterly GDP reading, rose by 0.4% in May. Matthew Luzzetti, Chief US Economist at Deutsche Bank (NYSE:DB), described it as a “decent print,” noting that the control group has seen its largest gains since December over the past three months.

“The consumer is certainly slowing,” Luzzetti stated. “But at the moment, I don’t think it’s a worrying trend. It seems to be returning to a more normal economic pace.”

The report follows the Federal Reserve’s revised Summary of Economic Projections, which estimated one interest rate cut this year. The Fed’s commitment to maintaining high interest rates longer than expected has raised concerns among economists about a potential significant slowdown in the US economy.

Allianz Chief Economic Adviser Mohamed El-Erian told Yahoo Finance that delaying a rate cut until December could result in a more pronounced economic slowdown than necessary.

In the past week, markets have increasingly anticipated a September rate cut. On Tuesday, the CME FedWatch Tool showed a 67% chance of a cut in September, up from 52% the previous week.

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