U.S. shoppers opened their wallets wide in May, giving retailers a solid 0.9% bump in sales for the month and extending a four-month streak of gains. The latest snapshot from the Commerce Department shows consumers still swiping their cards despite higher energy costs and simmering international tensions tied to the Iran war. The strength was broad but uneven, with robust demand for autos, home furnishings and online goods helping offset softer spending at restaurants and electronics stores. The result adds yet another data point that could complicate the Federal Reserve’s policy plans later this year.
As reported by New Orleans CityBusiness, which carried Reuters reporting, retail receipts rose 0.9% in May, easily beating economists’ 0.5% forecast, and were up 6.9% from a year earlier. Core retail sales, the so-called control group used to estimate consumer spending in GDP, climbed 0.7%. The Commerce snapshot showed non-store retailers, including many online sellers, jumping 1.5%, while auto-dealership sales rebounded 1.2%. Electronics and appliance stores slipped into the red for the month. Service-station receipts climbed sharply, reflecting the earlier run-up and later retreat in gasoline prices rather than a surge in gallons pumped.
Category winners and losers
The gains were hardly uniform across the mall. Furniture sellers and online retailers did a lot of the heavy lifting, while restaurants and some specialty shops saw business cool. That split suggests the overall rise may be concentrated among certain income groups and purchase types, rather than a universal shopping boom. Because the figures are reported in nominal dollars, higher prices at the pump and bigger sticker prices on vehicles can inflate sales totals even if the number of items sold does not move much. AP News notes that big tax refunds and a firmer jobs backdrop have been propping up spending, while also warning that those cushions are starting to thin out.
Fed pause, stronger growth nowcast
The Federal Reserve held its benchmark overnight rate steady at 3.50% to 3.75% at its June meeting and, in language picked up by coverage, said economic activity was “expanding at a solid pace despite elevated uncertainty.” New Orleans CityBusiness carried the Reuters rundown of the post-meeting take. In the wake of the retail report, the Atlanta Fed’s GDPNow model nudged its second-quarter growth estimate higher, to about a 3.0% annualized pace. That stronger nowcast suggests the latest burst of consumer spending could give headline GDP growth a noticeable lift, according to the Atlanta Fed commentary.
Why economists are cautious
Even with the upbeat sales figures, a lot of economists are keeping their enthusiasm in check. The unusually large tax refunds earlier this spring and rising asset values have helped households keep spending, but savings have been drawn down and more families are leaning on credit to cover purchases. That mix raises the risk that consumer spending will slow if refunds fade, borrowing costs climb or energy prices spike again. AP News quoted economists warning that these pressures could trim retail growth later in the year.
For shoppers and local businesses, the near-term backdrop is a bit of a split screen. On one side, demand for goods still looks resilient, supporting sales and payrolls. On the other, the staying power of that demand depends on whether household income keeps outrunning price pressures. The next round of consumer-credit and inflation data, along with the Fed chair’s remarks at upcoming briefings, should offer clearer clues on whether this spending streak has legs or is just a short-lived shopping spree.
