Sales at US retailers rose last month at an unexpectedly weak pace as Americans continue to deal with still-high inflation and elevated interest rates.

Retail sales rose just 0.1% in May from the prior month, the Commerce Department reported Tuesday. That’s better than April’s downwardly revised 0.2% decline but below the 0.3% gain economists projected in a FactSet poll. The figures are adjusted for seasonal swings but not inflation.

Sales declined the most at gas stations, down 2.2% in May. Excluding that, sales were up by 0.3% last month. American shoppers also pulled back on purchases at furniture stores (-1.1%) and shops that sell building materials and garden equipment (-0.8%).

Meanwhile, spending was the strongest at specialty stores that sell sporting goods, books, and musical instruments, which jumped by 2.8% last month.

Monthly retail sales have increased four times over the past six months through May, but figures for April and March were revised lower, the Commerce Department said Tuesday.

Inflation is down from the 40-year highs of two years ago, but it remains elevated. Meanwhile, interest rates are at their highest in nearly a quarter century after the Federal Reserve launched an aggressive rate-hiking campaign in 2022 to rein in price hikes. Household savings accumulated during the Covid-19 pandemic are dwindling, and may have already been exhausted.

A slowing economy help builds a case for the Fed to begin cutting interest rates — if it’s accompanied by inflation also easing.

“Spending is cooling back towards a more sustainable pace,” Joseph Brusuelas, chief economist at RSM US, told CNN’s Matt Egan in an interview. “It’s important we don’t confuse a slower pace of spending with the economy turning over, because that’s clearly not happening.”

“To be honest with you, this is a big relief for policymakers at the Fed,” he added.

Shoppers are fatigued
Evidence is starting to mount that US consumers are pulling back as they face tough economic hurdles.

Retailers such as Walmart, Kohl’s and Target have said that shoppers are feeling pinched and are starting to cut back. While lower-income Americans were already struggling, the pain has now spread to middle-income consumers.

“Our customers continue to be pressured by a number of economic factors, including high interest rates and inflation,” Kohl’s CEO Thomas Kingsbury said in an earnings call earlier this month. “Our middle income customer continues to be impacted.”

There are signs that even wealthier shoppers are feeling strained. Walmart, America’s largest retailer, said higher-income consumers have been flocking to its stores in search of bargains. High-end retailers have also sounded the alarm of a broad and ongoing slowdown in luxury spending.

But at the same time, spending on travel and other in-person experiences such as concerts is expected to be robust this summer. The Commerce Department releases broader consumer spending figures for May, which include services, later this month. Tuesday’s retail sales report only captures spending on goods and food services.

https://www.cnn.com/2024/06/18/econo...may/index.html

Feelsgoodman to be frugal