Shoppers walk past sale signs in a mall, White Plains, N.Y.
Scott Mlyn | CNBC
U.S. retail sales increased in May and sales for the prior month were revised higher, suggesting a pick-up in consumer spending that could ease fears the economy was slowing down sharply in the second quarter.
The Commerce Department said on Friday retail sales rose 0.5% last month as households bought more motor vehicles and a variety of other goods. Data for April was revised up to show retail sales gaining 0.3%, instead of dropping 0.2% as previously reported.
Economists polled by Reuters had forecast retail sales climbing 0.6% in May. Compared to May last year, retail sales increased 3.2%.
Excluding automobiles, gasoline, building materials and food services, retail sales advanced 0.5% last month after an upwardly revised 0.4% rise in April. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.
They were previously reported to have been unchanged in April. Consumer spending accounts for more than two-thirds of economic activity.
The solid gains in core retail sales in April and May suggested consumer spending was gaining speed in the second quarter after braking sharply in the January-March quarter.
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That could see economists raising their second-quarter GDP growth estimates, which are currently below a 2.0% annualized rate. The economy grew at a 3.1% pace in the January-March quarter after getting a temporary boost from exports and an accumulation of inventory.
Exports dropped in April and inventory investment is slowing. In addition, manufacturing production and home sales fell in April. The outlook for consumer spending is mixed. While consumer confidence remains strong, wage growth retreated in May and hiring moderated sharply.
Overall, the economy is losing steam as the stimulus from last year’s $1.5 trillion tax cut and increased government spending dissipates. The trade war between the United States and China, which escalated recently, is also hurting the economy.
Last month, sales at auto dealerships accelerated 0.7% after dropping 0.5% in April. Receipts at service stations rose 0.3%.
Building materials and garden equipment sales edged up 0.1%, while online and mail-order purchases jumped 1.4%.
Sales at clothing stores were unchanged and receipts at furniture outlets nudged up 0.1%. Sales at bars and restaurants increased 0.7% last month, while those at hobby, musical instrument and book stores rose 1.1%.