By Geoffrey Smith
Investing.com -- U.S. retail sales fell for the first time in five months in May, suggesting that the economy is cooling faster than thought as the Federal Reserve tightens monetary policy.
Retail sales fell 0.3%, while core retail sales, which strip out some of the index's more volatile components rose 0.5%, less than the 0.8% expected. April data for both series were also revised down.
The report said that sales growth slowed to 8.1% on the year. As the data are not adjusted for price changes, that suggests that retail sales volumes fell from a year earlier, given that annual inflation ran at an annual rate of 8.6% in May.
Spending weakened conspicuously in big-ticket and durable goods sectors, with sales of autos and car parts falling 3.5%, furniture sales falling 0.9% and sales of electronics and other appliances falling 1.3%. Non-store retailers, which profited disproportionately from the surge in online shopping during the pandemic, also saw a further 1.0% decline in their sales. Sales of apparel edged up only 0.1%, after a 6% surge in April due to the emergence of spring and summer catalogs, while general merchandise sales also only notched a 0.1% rise.
Anecdotal evidence of higher prices hitting consumer spending has been mounting for some weeks now, since a slew of forecast downgrades from retailers including Walmart (NYSE:WMT) and Target (NYSE:TGT) during the last quarterly earnings season. Target has since warned that it would have to cut prices to shift high volumes of unsold inventory.
"This IS the inflation peak," said Dan Alpert, managing partner of Westwood Capital via Twitter. "The news from Target last week was not an anomaly."
There was further evidence of rising energy costs crimping spending on other goods and services. Sales at gas stations, which had risen 43% in April as the effects of Russia's Ukraine war reached the pumps, rose another 4% in May. By contrast, sales at bars and restaurants, which had grown over 17% in April thanks to the arrival of spring and the fading of the pandemic, slowed sharply - they grew only 0.7%.
Elsewhere, there were further - albeit still tentative - signs of inflation pressures starting to ease in the New York Fed's Empire State Manufacturing Survey, published at the same time. The survey's main index improved to -1.2 from -11.6 in May, but inventories rose markedly.