US Retail Spending in May Disappoints as Sales Increase by Only 0.1%

By Trisha Andrada

Jun 19, 2024 12:19 AM EDT

A customer shops at a Safeway store on June 11, 2024 in Mill Valley, California. (Photo : Justin Sullivan/Getty Images)

With American consumers still struggling to cope with persistently rising inflation, retail expenditures in May were less than anticipated.

The United States Department of Commerce released data on Tuesday, June 18, stating that sales increased by 0.1% month-over-month, which is 0.1% lower than the Dow Jones projection. Nonetheless, it improved over April's revised downward 0.2% decrease.

As compared to the same period last year, sales rose 2.3%.

Sales Statistics for May

After excluding vehicles from the equation, the sales figure fell short of expectations, falling 0.1% instead of 0.2%.

Gas station revenues recorded a 2.2% monthly decline, exacerbated by the moderating effect of petrol prices. The 2.8% gain at music and book shops, as well as sporting goods retailers, helped to mitigate this effect.

While restaurants and bars decreased by 0.4%, online retailers rose by 0.8%. Home furnishings and furniture businesses also declined by 1.1%.

Treasury rates fell, and stock market futures remained unchanged primarily after the report.

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Market Anxiety

Amid market anxiety about the economy's trajectory and the Federal Reserve's monetary policies going forward, the Commerce Department report surfaces. Nearly two-thirds of economic activity comes from consumer spending, so any slowdown in this area might prompt the Fed to lower interest rates and imply a slowdown in growth, according to CNBC.

Recent inflation statistics are good, but consumers have been feeling the pinch of price increases for almost two years, and their spending is beginning to show indications of weakness.

As measured by a Commerce Department index used by the Fed as its primary indicator, annual inflation was 2.7% in April. Maintaining inflation below 2% is the Fed's primary objective.

At their meeting last week, Fed officials signaled the possibility of one quarter-point interest rate cut this year, while market pricing suggests two. After retail statistics, fed funds futures traders bet more on the Fed relaxing, putting in a 23% possibility of three cuts this year, according to the CME Group's FedWatch tool.

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