In May, consumer spending saw a slight uptick as retail sales rose by 0.1%, falling below economists' projections. This marginal increase comes amidst lingering concerns over high inflation and interest rates, which have tempered consumer spending habits. April sales were also revised downward, showing a 0.2% decline from the initial estimate of being unchanged. The trend in retail sales has been fluctuating in recent months, with a 0.6% increase in March and a 0.9% rise in February, following a 1.1% decline in January attributed in part to adverse weather conditions.
Excluding gas prices and auto sales, retail sales showed a similar modest increase. When excluding sales from gasoline, which has seen a decline in prices, sales were up by 0.3%. The retail sales data, however, does not encompass certain consumer expenditures such as travel and lodging. Notably, sales at restaurants, the sole service category tracked in the report, fell by 0.4% in May.
While clothing and accessory stores experienced a 0.9% increase in sales, electronics and appliance stores saw a 0.4% gain. Online sales also rose by 0.8%, but building material and garden supplies sales declined by 0.8%. Gas stations reported a notable 2.2% decrease in sales, coinciding with a drop in the national average price of unleaded gasoline from $3.59 to $3.45 per gallon over the past month.
The consumer spending landscape has been influenced by a strong job market and rising wages, yet remains challenged by rising credit costs and persistent inflationary pressures. To alleviate some of the burden on consumers, major retailers like Target and Walmart have introduced price reductions, both temporary and permanent, as summer approaches.
Recent economic indicators have shown a mixed picture, with robust job growth in May but ongoing concerns about high interest rates. Inflation, however, has shown signs of easing, with consumer prices remaining unchanged from April to May. The core inflation index, excluding food and energy costs, rose by 0.2% during the same period, marking the smallest increase since October.
Despite the Federal Reserve's intention to cut interest rates only once this year, consumer sentiment has declined for the third consecutive month, reflecting lingering worries about inflation. Retail executives note that consumers are still making purchases but are increasingly selective in their spending choices, seeking value for their money amidst economic uncertainties.
As consumers navigate the current economic landscape, retailers are observing shifts in purchasing patterns, with a focus on value-driven choices and adjustments in spending habits to adapt to changing market conditions.
