U.S. Retail Sales Unexpectedly Decline as Consumers Grapple with Inflation
June 14, 2022
Retail sales turned negative for the first time in five months in May as consumers pulled back on spending in the face of surging inflation.
Retail sales, which include spending in stores, online, and restaurants, fell by a seasonally adjusted 0.3% in May, according to the Commerce Department. Economists surveyed by Dow Jones estimated that sales would increase by 0.1%. The sales were well below the pace seen in April, when they climbed by 0.7%, downwardly revised from an initial estimate of 0.9%.
A steep decline in car sales, driven by high prices, low inventory, and higher interest rates on car loans, had an outsized impact on the month’s data. Excluding vehicles, the month’s sales were up 0.5%, still below expectations of a 0.8% increase.
On an annual basis, sales were up 8.1% in May, which would normally be considered a robust gain, but is below the 8.6% annual inflation rate in May. Retail sales are not adjusted for inflation.
Consumer spending has been the primary driver of the nation’s post-pandemic recovery, and now that they are weakening, economists are lowering their expectations for GDP growth in the second quarter.
Analysts at JPMorgan have lowered their GDP forecast to 2.5% from a previous estimate of 3.25%, while data firm IHS Markit is expecting just 0.9% growth for the quarter.