The FINANCIAL — U.S. retail sales surged in May, a sign consumers are stepping up spending after a cautious start to the year, according to Nasdaq.
Sales at retailers and restaurants rose 1.2% from the prior month to a seasonally adjusted $444.9 billion in May, the Commerce Department said on June 11. Figures for the prior two months were also revised up to show stronger consumption that previously estimated this spring.
Economists surveyed by the Wall Street Journal had expected a 1.3% gain in May.
Retail sales rose 0.2% in April, up from a previously estimated flat reading. Sales rose a revised 1.5% in March, marking the strongest monthly gain in five years.
The three consecutive monthly improvements helped offset declines from December through February.
Strong auto and gas sales led the May advance, but the improvement was broad based. Every category outside of health and personal-care stores posted an increase last month.
Vehicle and parts sales rose 2% last month. Automakers posted their best sales month in May, in terms of volume, since 2001. The improvement was largely due to renewed demand for sport-utility vehicles and trucks.
Meanwhile, an uptick in gasoline prices helped gas station sales advance 3.7% last month.
Excluding autos, sales increased 1%. And excluding gasoline, sales also rose 1% in May. When excluding both categories, sales were up 0.7% last month.
Retail sales figures are a key barometer for overall consumer spending, which accounts for about two-thirds of economic output in the U.S. During the winter months households remained cautious amid bad weather and a broader economic slowdown.
The recent upward trend in spending is likely supported by lower energy prices from a year earlier, steady hiring and a small acceleration in wages.
This spring’s growth in retail sales, combined with better job gains last month, could be signs the economy is poised to accelerate again after a first-quarter contraction. And the March revision in retail sales and services-spending data released Wednesday could cause the government to recast its reading of first-quarter economic growth later this month.
From a year earlier retail sales are up 2.7%. The increase comes during a time when consumer prices have largely held steady.
The retail-sales data are adjusted for seasonal variations but not for price changes. The report doesn’t include estimates for most services, which make up the bulk of consumer spending.
Thursday’s report showed sales at building materials and gardening stores rose 2.1% in May.
Economists often exclude auto, gas and building material purchases when evaluating underlying consumer strength. Outside of those categories, the gains were not as strong.
Spending at clothing stores increased 1.5% and outlays at nonstore retailers, a category that includes Internet purchases, rose 1.4% in May. But spending at restaurants and bars increased just 0.1% on the month and spending at grocery stores increased 0.3%.
Still, the recent improvement could give Federal Reserve officials some confidence that weakness early in the year was temporary. Central bankers are assessing the health of the economy as they contemplate when to raise short-term interest rate from near zero.
Fed officials are meeting next week. While a rate increase is not expected following that meeting, better economic data could set the stage for a September liftoff.
Weaker consumption figures early in the year were likely transient, Federal Reserve Bank of St. Louis President James Bullard said last week. “But I would like to see that confirmed in the near term, so that we can get on with our normalization process.”
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