US retail sales unexpectedly rose in May, showcasing resilient consumer demand in the face of mounting economic challenges.
(Bloomberg) — US retail sales unexpectedly rose in May, showcasing resilient consumer demand in the face of mounting economic challenges.
The value of retail purchases climbed 0.3% after a 0.4% gain in April, Commerce Department data showed Thursday. Excluding autos and gasoline, sales were up 0.4%. The figures aren’t adjusted for inflation.
The overall figure beat all but one estimate in a Bloomberg survey of economists. Sales at 10 out of 13 retail categories advanced last month, in part reflecting greater spending on cars — which were widely expected to drop.
While the figures came in stronger than expected, they still show moderating consumer demand from the past year. Americans have kept spending even against a backdrop of elevated prices and higher interest rates, supported by a still-vibrant job market and pent-up savings.
The sales data offer another slice of the demand picture for Federal Reserve officials ahead of their July policy meeting.
Sustainable household spending has kept price pressures from slowing appreciably. Fed officials left interest rates unchanged on Wednesday, but hinted at more tightening ahead. Their new quarterly forecasts expect stronger economic growth and underlying inflation.
Read More: Powell Says Nearly All Officials Expect ‘Some’ Further Fed Hikes
Receipts at restaurants and bars — the only service-sector category in the report — rose 0.4%.
The retail sales report will help shape economists’ estimates for personal spending and gross domestic product in the second quarter. Before the figures, the Atlanta Fed’s GDPNow forecast expected a 1.4% annualized increase in consumption for the period.
So-called control group sales — which are used to calculate GDP and exclude food services, auto dealers, building materials stores and gasoline stations — advanced 0.2% in May after rising 0.6% in the prior month. Consumer spending accounts for about two-thirds of GDP.
The control group sales “suggest household spending will remain positive but will decelerate in the second quarter,” Rubeela Farooqi, chief US economist at High Frequency Economics, said in a note.
Because the retail sales data aren’t adjusted for changing prices and only include one service-sector category, it can be difficult to draw concrete conclusions. More complete inflation-adjusted data on May outlays including services are due later this month.
A separate report Thursday showed applications for US unemployment benefits last week stayed at the highest level since late 2021.
–With assistance from Jordan Yadoo.
(Adds economist’s comment)
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