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US Retail Sales Outpace Forecasts in May as Consumers Remain Resilient

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US Retail Sales Outpace Forecasts in May as Consumers Remain Resilient

US retail sales rose more than expected in May as consumers kept spending despite higher prices.

Sales climbed 0.9% after a downwardly revised 0.4% gain in April, the Census Bureau reported Wednesday. The consensus was for a 0.6% increase in May, based on a Bloomberg survey.

Spending on motor vehicles and parts dealers rose 1.2% after a 0.9% decline in April. Gasoline station receipts rose 3.4% after a 2.4% gain in April.

"Consumers showed their resilience yet again last month," Scott Anderson, chief US economist at BMO, said in a report. "Higher goods and energy prices are definitely boosting the sales gains, but consumers in aggregate continue to meet the challenge and grow their real inflation-adjusted spending."

Retail sales without the motor vehicle and gas components rose 0.5%, matching April's increase and topping the consensus for a 0.3% gain.

Outlays on furniture and home furnishings rose 1% in May following a 1.5% drop in April. Spending on electronics and appliances fell 0.5%, while the clothing and clothing accessories category registered a 0.3% gain. Sales at sporting goods outlets increased 0.3%.

"The worst of the gas price increases appear to be in the rearview mirror," Ksenia Bushmeneva, economist at TD Economics, said in a report. "With gas prices down by roughly 50 cents in June on US-Iran peace progress, households will get some modest reprieve."

Retail sales were up 6.9% from a year earlier, accelerating from April's 4.8% pace.

"The strength of May's retail sales report and the acceleration from April's spending pace will raise more yellow flags at the Fed as it tries to tamp down consumer inflation pressures," BMO's Anderson said.

The Federal Reserve's monetary policy committee will announce its latest decision on interest rates at 2 pm ET Wednesday. Markets widely expect the central bank to keep interest rates unchanged for the fourth straight time, according to the CME FedWatch tool.

"Doves will remain on the back foot at today's meeting due to this consumer resilience, nearly ensuring we get a hawkish lean from the policy statement" and new Fed Chair Kevin Warsh, Anderson said.

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