Retail sales increased more than expected in May, helped by warmer weather, cooling gasoline prices and continued consumer resilience despite inflation and slower hiring.
By yourNEWS Media Newsroom
Americans increased their spending in May as warmer weather, lower gasoline prices and lingering support from tax refunds helped lift retail activity.
Retail sales rose 0.9% in May, according to Commerce Department data released Wednesday. The increase exceeded expectations and followed a revised 0.4% gain in April.
The report showed that shoppers continued to spend even as inflation, higher fuel costs earlier in the year and a slower labor market pressured household budgets. Economists said generous government tax refunds helped support spending in April and May, though that boost is beginning to fade.
Excluding gasoline stations, retail sales rose 0.7% in May.
Several categories showed gains. Sales at clothing and accessories stores increased 0.3%, while home furnishing and furniture stores posted a 1% rise. Online sales climbed 1.5%, reflecting continued strength in e-commerce.
Electronics and appliance stores moved in the opposite direction, with sales falling 0.5%.
The Commerce Department report offers a limited picture of consumer activity because it focuses on retail goods and does not include several major services categories, such as travel and hotel stays. Restaurants, the only services category included in the retail report, recorded a 0.1% decline.
Consumer spending remains central to the U.S. economy, accounting for most economic growth. Despite higher prices and weaker hiring, spending has remained resilient so far this year.
Inflation pressures remain a concern. Data released last week showed consumer prices rose 4.2% in May compared with a year earlier, the highest inflation rate in three years. Higher gasoline prices tied to the Iran war contributed to that increase.
A tentative agreement to end the Iran war and reopen the Strait of Hormuz has raised hopes that energy markets may stabilize. However, analysts have warned that even if oil begins moving more freely from the Middle East, it may take time for supply pressures to ease.
Gasoline prices have already come down from recent highs. The national average fell about a penny overnight to $4.02 per gallon, according to AAA. That is down 11% from $4.51 a month earlier. AAA data showed the national average has not been below $4 per gallon since March.
Retail and apparel industry leaders said the Iran agreement could help, but uncertainty remains.
“While the deal is encouraging, our industry is still holding its breath,” said Steve Lamar, CEO of the American Apparel & Footwear Association. “Our question now is, will this agreement be strong enough for our global industry to begin recovering?”
Even if gas prices continue to decline, some consumer behavior may have already shifted. Analysts said shoppers may keep habits they adopted when fuel prices were rising sharply, including seeking discounts at big-box retailers that operate gas stations.
Visits to gas stations run by chains such as BJ’s, Costco and Sam’s Club began increasing in early March as fuel prices climbed, said R.J. Hottovy, head of analytical research at Placer.ai, which tracks consumer movement using cellphone data.
Those retailers offer discounted gasoline to members, making them more attractive to cost-conscious drivers.
The May retail report suggests consumers were still willing to spend across much of the economy, particularly online and in home-related categories. But economists are watching closely to see whether the fading tax-refund boost, inflation and energy-market uncertainty begin to weigh more heavily on households in the months ahead.
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