Investing.com — U.S. increased at a slower-than-anticipated rate on a monthly basis in May, pointing to lingering headwinds to momentum in consumer spending activity despite inflationary pressures showing signs of cooling.
Retail sales rose by 0.1% last month, accelerating from a downwardly-revised decline of 0.2% in April, according to Commerce Department data on Tuesday. Economists had predicted that retail sales, which mostly reflect goods and are not adjusted for inflation, would grow by 0.3%.
Monthly sales at gasoline stations slipped, dented in part by a fall in gas and motor vehicle prices.
Although inflation has proved to be sticky and interest rates remain elevated, U.S. sales have been largely resilient thanks in part to a solid labor market. But the uptick in sales has been dampened by more consumers choosing to spend on essential items instead of pricier luxury goods. Meanwhile, recent data has also indicated that workers who lose their jobs are struggling to find new work.
The retail sales figures could impact the outlook for the wider economy, which may in turn influence how the Federal Reserve approaches potential interest rate reductions later this year.
On Monday, Philadephia Fed President Patrick Harker backed one 25-basis point cut in 2024, citing signs of easing but above-trend economic activity, some slackening in labor demand, and an ongoing slowdown in inflation. His comments echoed a median rate forecast for the rest of the year that was released by policymakers last week.