Americans picked up their spending at retail stores in May as inflation showed welcome signs of slowing down.
Retail sales, a measure of how much consumers spent on a number of everyday goods, including cars, food and gasoline, rose 0.3% in May, the Commerce Department said Thursday. That is slightly above the 0.1% increase projected by Refinitiv economists, although it is below the 0.4% gain recorded in April.
Excluding the more volatile measurements of gasoline and autos, sales climbed 0.4% last month.
The figures are not adjusted for inflation.
FED PAUSES RATE HIKES FOR FIRST TIME IN 15 MONTHS BUT HINTS AT FUTURE INCREASES
“Consumers beat the experts’ expectations once again,” said Robert Frick, corporate economist with Navy Federal Credit Union. “What’s being underestimated is not just pent-up demand for spending at bars and restaurants and for vehicles, but the continuing desire of Americans to furnish their homes.”
Consumers spent more on big-ticket items like cars, furniture and home improvement projects. Gas sales slid 2.6% in May as the cost of fuel tumbled.
Sales declined in just two of 13 retail categories last month.
SILVER LINING OF HIGHER INTEREST RATES: SAVINGS ACCOUNT RATES
A solid job market and big wage increases have helped to buoy consumer spending. That strong spending, however, could keep inflation elevated, adding pressure on the Fed in its quest to cool the economy and consumer prices.
“The upside for retail spending does have a downside, however, in the form of continued inflationary pressure,” said Ben Ayers, Nationwide senior economist. “Higher interest rates haven’t tamped down consumer demand enough to meaningfully slow price growth, especially on the services side of the economy. These hot trends for consumers could lead to another interest rate hike by the Fed in July.”
The Federal Reserve left the benchmark federal funds rate unchanged on Wednesday for the first time in its more than year-long tightening cycle. However, policymakers signaled that at least two more rate hikes are on the table this year as they try to crush stubborn inflation.
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In other economic news, the Labor Department reported the number of Americans filing for unemployment benefits last week was unchanged at 262,000. That is well above the 2019 pre-pandemic average of 218,000 claims and marks the steepest level for jobless claims since October 2021.
Continuing claims, filed by Americans who are consecutively receiving unemployment benefits, fell slightly to 1.77 million for the week ended June 3, a decrease of 6,000 from the previous week.