US Retail Sales Miss, Fall 0.3% in Biggest Decline in 16 Months
US retail sales marked their biggest decline in more than a year in May amid declining purchases of motor vehicles and discretionary spending, which could temper expectations for a sharp acceleration in economic growth in the 2nd Quarter.
The US Commerce Department said Wednesday retail sales fell 0.3% in May after an unrevised 0.4% increase in April. May’s decliner was the largest since January 2016 and confounded economists’ expectation for a 0.1% gain.
Retail sales rose 3.8% in May on a Y-Y basis. Some of the drop in monthly retail sales reflected lower gasoline prices, which weighed on receipts at service stations.
Excluding automobiles, gasoline, building materials and food services, retail sales were unchanged last month after an upwardly revised 0.6% rise in April.
These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product and were previously reported to have increased 0.2% in April.
Growth is expected to pick up this Quarter after being held back by a near stall in consumer spending and a slower pace of inventory investment at the start of the year.
The economy grew at a 1.2% annualized rate in Q-1 after notching a 2.1% pace in the October-December frame
The Atlanta Fed is forecasting the economy growing at a 3.0% annualized rate in Q-2, but this estimate could be trimmed following the weak core retail sales.
May’s surprise sluggishness in consumer spending, which accounts for about 70% of the US economy, could worry Fed officials who have previously attributed the slowdown in domestic demand to transitory factors.
Wednesday, the Fed raised interest rates by 25 bts, the 2nd increase this year. Further rate hikes are likely to depend on the outlook for inflation and economic growth.
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