Retail sales rose at a slower pace than expected in May as higher interest rates and inflation continue to pressure consumers.
Retail sales rose 0.1%, below economists’ expectations of 0.3%. Retail sales in April fell by 0.2%According to revised data from the Ministry of Commerce.
Excluding autos and gas, retail sales rose 0.1%, below estimates for a 0.4% increase but higher than the 0.3% decline in April.
Tuesday’s retail sales reading adds to “signs that consumers are struggling a little,” noted Paul Ashworth, chief economist at Capital Economics for North America.
“The weak retail sales data for May supports our view that after a disappointing first quarter, GDP growth remains somewhat lackluster in the second quarter as well,” Ashworth said.
Within the report, gasoline stations led the declines, declining by 2.2% from the previous month. Sales at furniture and home stores were also lagging with sales down 1.1%. Meanwhile, sporting goods and hobby stores were the biggest gainers, with sales up 2.8% from the previous month.
“Consumer spending is slowing because real income growth is moderating and because some consumers are becoming credit constrained amid rising interest rates and increased use of credit cards,” Michael Pearce, deputy chief U.S. economist at Oxford Economics, wrote in a note to clients.
The report comes less than a week after the Fed’s revised Summary of Economic Projections (SEP) showed the central bank estimates one rate cut this year. Committing to higher interest rates for longer than many had hoped has economists increasingly concerned that restrictive policy could lead to a significant slowdown in the US economy.
Mohamed El-Erian, Allianz’s chief economic adviser, told Yahoo Finance on June 13 that the balance of risks for the Fed if it waits to cut in December “is in favor of being too late and the economy slowing too much.”
Last week, markets were increasingly pricing in the possibility of a rate cut in September. On Tuesday, markets were forecasting a 67% chance of a cut in September, up from a 52% chance last week. According to CME FedWatch.
Josh Schaeffer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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