Publish date:

U.S. May Retail Sales Slump on Fading Stimulus, Surging Inflation

U.S. consumers tightened their belts last month, with May retail sales falling 1.3% from an upwardly revised April total as inflation soared and government stimulus faded.

U.S. May retail sales slowed more than expected last month, data from the Commerce Department indicated Tuesday, as the impact of stimulus from the American Rescue Act continued to fade and prices rose at the fastest pace in more than ten years.

May retail sales fell 1.3% from last month  at a collective $620.2 billion, the Commerce Department said, well shy of the Street consensus forecast of a 0.8% decline. The April total, however, was revised to higher, to a gain of of 0.9% on the month. Stripping out auto and gasoline sales, May retail sales were down 0.8%, the Commerce Department report noted.

"The retail sales numbers aren’t as weak as they look; April sales were revised up by a net 1.5%, headline and ex-autos and May forecasts were all over the map, given the lack of reliable advance indicators and the uncertain timing of mean-reversion following the boost from the latest stimulus payments," said Ian Shepherdson of Pantheon Macroeconomics. "We expect the underlying upward trend in core sales to re-emerge next month, as the drag from the end of the stimulus payments fades and the continued reopening persuades people to start running down some of their huge pile of accumulated savings. The headline declines in today’s numbers tell us nothing about the future."

Consumer price increases may have also crimped spending, with May inflation rising 5% from last year, according to data from the Bureau of Labor Statistics published last week, the fastest pace since 2008. 

TheStreet Recommends

Wage pressures are beginning to mount in the labor market, with JOLTS job openings data indicating 9.3 million open positions, the highest on record, while last week's May non-farm payrolls reported showed average hourly earnings rise 2% on the year. 

The Bureau for Labor Statistics said 559,000 new jobs were created last month, lead by gains in leisure and hospitality, with headline unemployment rate edging fell to 5.8% from 6.1%. The May tally was modestly lower than the market forecast of 650,000.

U.S. equity futures pared gains in the wake of the data release, with contracts tied to the Dow Jones Industrial Average indicating a 1 point opening bell gain and those linked to the S&P 500 priced for a 2.6 point advance.

Nasdaq Composite futures, meanwhile, were indicating an opening bell gain of just 3 points as benchmark Treasury bond yields rose to 1.506%