Retail sales saw a modest rise in May as inflation continues to be a problem for consumers, according to the latest data from the Census Bureau.
– M-O-M: US retail and food service sales rose of 0.1% to $703.1 billion in May, up from the 0.2% drop last month but falls short of economists’ projections of a 0.2% gain.
– Y-O-Y: Retail sales are up 2.3% compared to the same time last year, down from 2.7% in April and the lowest level since January.
The Good & The Bad: Sporting goods stores led the pack with a 2.4% increase in sales. Clothing stores followed with a 0.9% rise, while car dealerships and online retailers both saw sales increase by 0.8%.
– On the flip side, gas station sales fell 2.2% due to lower gasoline prices. Furniture store sales dropped 1.1%, and home improvement and garden supplies stores experienced a 0.8% decline.
Inflation Problems: While retail sales did outplace inflation in May, that was not the case on a year-over-year basis. . when looking at year-over-year data, retail sales growth of 2.3% lags behind the 3.3% increase in prices, according to the latest CPI report. This indicates a potential erosion in real purchasing power.
Impact On Mortgage Rates: The cautious consumer spending indicated by modest retail sales growth may signal to policymakers that economic activity is cooling. This, coupled with the downward trend of inflation, provides the Federal Reserve with a rationale to consider lowering interest rates slightly. As the Fed gains more leeway to adopt a dovish stance, it can help push down mortgage rates, offering relief to homebuyers and potentially stimulating the housing market and broader economic activity.
