May retail sales fall 0.3% amid soaring inflation – Chicago Tribune

Americans unexpectedly cut spending in May from the previous month, highlighting how soaring inflation on necessities like gasoline is pushing them to be more cautious about buying discretionary items.

U.S. retail sales fell 0.3% last month, from a revised 0.7% increase in April, the Commerce Department said Wednesday.

A sharp drop in auto sales, mainly due to higher prices and a shortage of new car inventory, dragged down retail sales. Excluding automobiles, retail sales even increased by 0.5% last month. But excluding gas station sales, retail sales fell 0.7%, showing how much higher prices at the pump explain more of shoppers’ overall spending.

The report also highlighted shoppers pushing back on some of the products that were in high demand at the height of the pandemic but are now out of favor. Sales fell about 1% for furniture and home furnishings and electronics and appliance stores. Sales at building and garden supply stores and general merchandise stores are showing signs of slowing.

Online sales fell 1% as shoppers returned to physical stores. At the same time, food store sales rose 1.2% due to higher prices, not increased consumption. Restaurant activity was up 0.7%.

“The price spike could finally weigh on real consumption,” said Andrew Hunter, senior economist at Capital Economist.

The snapshot comes as Americans have provided essential support to the economy, even after a year of soaring prices for gas, food, rent and other necessities. And the signs of recession risks are increasing. Inflation is at its highest for 40 years. Stock prices are collapsing. The economy actually contracted in the first three months of this year. And the Federal Reserve is making borrowing much more expensive.

Among the biggest concerns is the surge in inflation, which has become more widespread and persistent than expected. Consumer prices rose 8.6% last month from a year earlier, the biggest annual 12-month jump since 1981. The much higher prices for everything from plane tickets to meals at restaurant to new and used cars, have helped fuel the surge.

Meanwhile, the national average price at the pump hit $5.01 a gallon on Tuesday, from $4.45 a month ago, and has jumped more than 60% in a year.

Russia’s invasion of Ukraine has worsened global food and energy prices. Extreme lockdowns in China due to COVID-19 have worsened supply shortages.

On Wednesday, the Fed is expected to raise its benchmark interest rate, which affects many personal and business loans, by up to three-quarters of a percentage point. It would be the Fed’s biggest rate hike since 1994, and it could herald the start of a period of particularly aggressive central bank credit tightening — and with it, a heightened risk of a recession.

Sal Guatieri, senior economist at BMO Capital Markets Economics, said the weak retail sales report is unlikely to sway the Fed as it will have to see a “prolonged period of weakness in domestic demand and likely labor markets.” before breathing a sigh of relief. on the inflation front.

Last month, major retailers from Walmart to Target reported that soaring costs had weighed on their quarterly profits. They are grappling with a faster-than-expected shift from the sofas and casual clothes that were in high demand at the height of the pandemic to more pre-pandemic routines. They also see shoppers focusing more on basics and opting for cheaper products while juggling higher day-to-day costs. Target said earlier this month it was canceling orders for items such as sofas and cutting mounds of unwanted inventory while raising prices elsewhere to offset rising costs.

The retail report released Wednesday covers only about a third of overall consumer spending and does not include services such as haircuts, hotel stays and airline tickets.

AP Economics Writer Chris Rugaber in Washington contributed to this report.

#retail #sales #fall #soaring #inflation #Chicago #Tribune

Post expires at 3:40am on Monday June 27th, 2022