Retail sales turned negative in May as consumers pulled back spending while inflation surged, the Commerce Department reported Wednesday.
Advance retail and food service spending fell 0.3% for the month, below the Dow Jones estimate for a 0.1% gain. Excluding autos, sales were up 0.5%, which fell short of expectations for a 0.8% increase.
The numbers are not adjusted for inflation, which increased 1% for the month on the headline number and 0.6% excluding food and energy.
Sales were well below the pace in April, which posted a downwardly revised 0.7% increase from the initial 0.9% estimate.
Spending for the month declined even though sales at gas stations increased 4% due to fuel prices that scaled new heights, with regular unleaded hitting $4.43 a gallon in May and now running around $5. That growth was offset by a 3.5% decline at motor vehicle and parts dealers.
Miscellaneous store retailers saw a 1.1% drop in sales, while online stores posted a 1% decline. Bars and restaurants registered a 0.7% increase, part of a broader trend that has seen spending gradually shift from goods back to services.
On a yearly basis, sales were still up 8.1% as spending, combined with higher prices, has put a floor under the numbers. Consumers have been resilient through the inflation wave, using savings to compensate for the higher costs.
The retail release comes the same day the Federal Reserve is widely expected to raise interest rates three-quarters of a percentage point in an effort to tame inflation. The consumer price index for May reflected an 8.6% year-over-year increase, the highest since December 1981 and far above the Fed’s 2% target.
