Americans unexpectedly increased their spending at retail outlets in May as sales increased across a broad swath of merchants, defying expectations for a decline.
Retail sales rose by three-tenths of a percentage point in May, the Commerce Department said on Thursday, the second straight month of rising spending. Economists had been expecting a 0.2 percent decline.
Sales of motor vehicles and auto parts were much stronger than expected. Wall Street had expected a decline based on the unit sales figures reported by manufacturers. Instead, the dollar figure of sales rose 1.4 percent following the 0.4 percent rise in the prior month. Year-to-date sales are up two percent compared with last year.
Sales at gas stations fell sharply, reflecting the decline in gasoline prices in May. The Commerce Department said these were down 2.6 percent in May. Year-to-date, gas station sales are down 10.1 percent.
Excluding motor vehicles and gas station sales, retail sales and restaurant sales were up 0.4 percent for the month, a sizeable gain, and are up 5.6 percent year-to-date.
Sales rose at furniture stores, electronic and appliance stores, sporting and hobby stores, building materials and garden centers, general merchandise stores and department stores, and online retailers.
Sales at bars and restaurants were up 0.4 percent. In the first five months of the year, sales are up 12.9 percent compared with the period a year ago. Sales at grocery stores rose 0.2 percent and are up 4.6 percent compared with the first five months of 2022.
Sales were flat for the month at healthcare and beauty stores and at clothing stores.
The numbers are adjusted for seasonality but not for changes in prices. In May, the consumer price index rose by 0.1 percent and core prices—which exclude food and energy prices—were up by 0.4 percent.
The stronger than expected retail sales numbers are likely to support the case for more rate hikes from the Federal Reserve in the months ahead. Inflation has been running far above the Fed’s two percent target and most measures of underlying inflation show little signs of price pressures abating enough to bring inflation down to that pace. The resilience of the U.S. consumers suggests that even the aggressive rate hikes of last year have not diminished demand for goods and services as much as many economists expected.