The latest retail sales report has economists and analysts concerned as consumer spending shows signs of strain due to elevated interest rates. According to Oxford Economics, the disappointing report for May indicates a slowdown in spending, particularly in housing-related categories and at restaurants and bars.
Retail sales in May only increased by 0.1%, falling short of the 0.3% expected by economists. This follows a 0.2% decline in April, as reported by the Commerce Department. Excluding autos and gas, retail sales edged up by just 0.1%, below estimates for a 0.4% increase.
Michael Pearce, deputy chief US economist at Oxford Economics, pointed to moderating real income growth and credit constraints as factors contributing to the slowdown in consumer spending. However, he remains optimistic that consumer spending growth will hold steady in the second half of the year.
On the other hand, Raymond James’ chief economist Eugenio Aleman expressed a more pessimistic view, citing the weak start by the US consumer in the second quarter of the year.
The Federal Reserve recently signaled a more cautious approach to interest rate cuts, with only one cut expected this year instead of the previously anticipated three cuts. Despite the concerns over consumer spending, the Fed maintains its forecast for a strong economy, with steady unemployment rates and consistent economic growth expected in the coming years.
