U.S. May core adjusted retail sales — excluding volatile food, fuel and building materials sales — were flat compared to April and rose 1% from May 2016 to $253 billion, the U.S. Commerce Department said Wednesday.
Overall retail sales in May fell 0.3% from April and rose 3.8% from May last year, reflecting a pull-back on auto sales and the low price of fuel, the Commerce Department said. Energy prices also drove down the Consumer Price Index for non-farm consumers, which fell 0.1% in May on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics also reported Wednesday. Over the last 12 months, the all-items index rose 1.9%.
Furniture store sales rose 0.4% in May and clothing and accessories sales rose 0.3%. Sales at sporting goods, hobby, book and music stores fell 0.6%, department stores fell 1.0%, and at electronics and appliance stores fell 2.8%. E-commerce sales were up 0.8% from April and 10.2% from last year, according to the report.
The Federal Reserve on Wednesday raised its target range for the federal funds rate to between 1% and 1-1/4%, noting a tightening job market. But the other reports from the government, which included muted retail sales and price increases, suggest that shoppers remain spendthrifts despite a more robust job market.
However, while flat month-to-month sales appear to be gloomy, that narrow snapshot is deceptive, according to GlobalData Retail Managing Director Neil Saunders.
“These do not give a picture of the real state of retail,” he said in an email to Retail Dive. “The unadjusted year-over-year figures provide a much more accurate view of performance. On this basis, retail is doing well with total sales up by 5.2% — the highest rate of growth since January. Such an increase is aligned with the rise in consumer sentiment and the more robust numbers coming out of other areas of the economy.”
Low gas prices are boosting consumer confidence, according to Saunders, and the housing market is boosting home improvement and furniture sales year over year. “Our consumer data shows that while shoppers are not in splurging mode, they are becoming more relaxed in their spending habits,” he said.
Still, he agrees that American shoppers are wary and warned that future reports would be more restrained, especially if the Fed continues to edge up rates. “Despite the solid sales numbers and better sentiment numbers, it is worth noting that consumers remain cautious,” he said. “As such, the level of growth posted this month is unlikely to be sustained over the remainder of summer. This applies in particular if interest rates continue to rise. To date, the impact of rate increases has been small, but from our tracker, more consumers are now becoming concerned about the impact of higher interest payments on their various debts.”
For retailers, it will continue to be a highly situational picture, depending on what they’re selling. “While our forecast for 2017 remains solid, we maintain our view that growth will be patchy and not benefit all retailers,” Saunders said. “The pattern of winners and losers is set to continue.”