Retail sales declined by 0.9% in May compared to April, which was steeper than the anticipated 0.7% decrease. This marks the second consecutive monthly drop, following a strong 1.5% gain in March, when consumers accelerated purchases ahead of expected tariff changes. Out of the thirteen categories tracked in the report, seven experienced declines, with autos, building materials, and gasoline showing the largest decreases.
On a positive note, the “control group” – which excludes autos, gasoline, building materials, and food services – rose by 0.4%,surpassing expectations. This measure is especially significant because it directly contributes to second quarter GDP calculations.
What’s the bottom line? Retail sales are a key measure of consumer spending and play a critical role in assessing the health of the economy. Although May’s results were below expectations, this decline may simply reflect a normalization after the earlier surge in purchases. Fed officials are expected to monitor future retail sales data closely, as trends in consumer spending will also influence their decisions on interest rates and monetary policy.