US retail sales fall short of projections in May

The latest data on U.S. retail sales for May has just been released by the Commerce Department, and the results are mixed. Retail sales only saw a 0.1% increase last month, coming in lower than the 0.3% gain that economists had predicted. This sluggish growth can be attributed to lower gas prices, which weighed down receipts at service stations.

Despite the slight uptick in retail sales, the overall trend shows a slowing growth pattern. Higher prices and interest rates are causing households to prioritize essentials and cut back on discretionary spending. Additionally, banks are tightening access to credit, making it difficult for lower income borrowers to keep up with loan payments. While the labor market remains strong, wage increases are moderating, and it is becoming harder for individuals who lose their jobs to find new work quickly.

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However, it’s not all doom and gloom. Consumer spending, which is a significant factor in GDP growth, has shown some resilience. Retail sales excluding automobiles, gasoline, building materials, and food services rose 0.4% in May, indicating that consumers are still willing to open their wallets.

The Federal Reserve has taken note of these economic indicators and has decided to keep its benchmark overnight interest rate steady. While there were talks of potential rate cuts, policymakers have pushed out the timeline for any adjustments, with only one quarter-percentage-point reduction projected for this year.

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