Retail sales rose less than expected in May, increasing by 0.1% from April, the Census Bureau reported on Tuesday.
Economists had expected a 0.2% gain. April was revised down from flat to a drop of 0.2%.
The report offers an insight into the strength of consumer spending and the underperformance will reinforce the idea that the economy is slowing as 2024 progresses. Any weakness in consumer spending could spur the Federal Reserve to begin lowering interest rates earlier than expected. Markets are now pricing in just one cut to rates this year.
Online retail sales rose 6.8% from a year ago, while sales at food and drinking establishments were up by 3.8%. Declines were seen in furniture, building supplies and sporting goods stores.
“Consumer spending is decelerating as real income growth slows. Some consumers face credit constraints due to higher interest rates and increased credit card usage,” noted Oxford Economics’ Deputy Chief US Economist Michael Pearce in a client communication.
Looking ahead, the outlook for US retail sales remains mixed. Economic indicators suggest potential challenges. Rising inflation and interest rates could dampen consumer spending.
However, some analysts remain cautiously optimistic. They believe pent-up demand could drive future sales. As summer progresses, all eyes will be on consumer behavior. US retail sales will continue to be a key economic indicator.
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