US Markets
Tuesday, June 18th, 2024 3:10 pm EDT
Key Points
- Retail spending in May rose only 0.1%, falling short of expectations and reflecting ongoing consumer struggles with high inflation; excluding autos, sales declined by 0.1%.
- Lower gas prices contributed to a 2.2% drop in gas station receipts, while some sectors like sports goods, music, and book stores saw a 2.8% increase; overall, consumer spending appears to be weakening under prolonged inflationary pressures.
- The weak retail data has increased speculation about Federal Reserve monetary policy, with market pricing suggesting the potential for up to three interest rate cuts this year, although Fed officials have indicated a more cautious approach.
Retail spending in May was weaker than anticipated, with sales rising just 0.1%, falling short of the Dow Jones estimate of 0.2%. This slight increase follows a revised 0.2% decline in April, as reported by the Commerce Department. On an annual basis, sales saw a 2.3% increase. Excluding the auto sector, sales actually declined by 0.1%, contrary to expectations of a 0.2% rise.
Lower gas prices contributed to a 2.2% drop in gas station receipts, while sports goods, music, and book stores experienced a 2.8% increase. Online retailers saw a 0.8% rise in sales, whereas bars and restaurants experienced a 0.4% decline, and furniture and home furnishing stores saw a 1.1% drop.
The market’s reaction to the report was relatively muted, with stock market futures remaining flat and Treasury yields declining. This data has heightened investor concerns about the economic outlook and its implications for Federal Reserve monetary policy. Consumer spending, which accounts for about two-thirds of economic activity, is crucial, and any signs of weakness may indicate slower growth and potential interest rate cuts by the Fed.
Despite some recent encouraging inflation data, consumer spending appears to be weakening under prolonged price pressures. The Commerce Department’s preferred inflation measure for the Fed showed a 2.7% annual rate in April, or 2.8% excluding food and energy, still above the Fed’s 2% target.
Market expectations are currently forecasting two quarter-point interest rate cuts this year. However, Fed officials, in their latest meeting, suggested the likelihood of only one cut. Following the retail data release, traders increased their bets on more aggressive easing, with some predicting up to three cuts this year. Philadelphia Fed President Patrick Harker indicated that rate cuts later this year would depend on forthcoming data, and he currently foresees the possibility of just one rate reduction.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/06/18/retail-sales-report-may-2024-may-retail-sales-rise-0point1percent.html
