Retail sales in the United States rose just 0.1% in May, falling short of the projected 0.3% gain, according to data from the Commerce Department. This indicates a continued softening in consumer demand and raises concerns about the strength of economic growth for the rest of the year. Sales at gas stations saw the largest decline, down 2.2% in May. Sales at furniture and home furnishing stores also fell by 1.1% from April. However, specialty stores that sell sporting goods, books, and musical instruments experienced the strongest spending, with a 2.8% jump in sales. Sales at clothing and accessory stores rose 0.9%, while electronics and appliance stores posted a 0.4% gain. Online sales rose 0.8%. Business at building material and garden supplies fell 0.8%. The slower growth in retail sales is attributed to high interest rates and inflation, which are weighing on consumers. This raises concerns about the strength of the US economy and the potential for a recession. The consumer sector is important as it accounts for about two-thirds of the US economy. The market is reacting cautiously to the data, with futures trading around the flat line. The probability for a rate cut in September has increased slightly. Overall, the report indicates that consumers are pushing back on prices and reducing spending on discretionary items, while continuing to spend on health and personal care products. The retail sales report suggests a potential weakness in the US economy and raises questions about the stability of the economy and the likelihood of a recession. US retail sales rose 0.1% in May after a downwardly revised 0.2% drop in April. Economists had forecasted a 0.3% increase in May. The trend in sales growth has been slowing as banks tighten access to credit and lower-income borrowers struggle to keep up with loan payments. The less-than-expected increase in retail sales may lead to a rate cut by the Federal Reserve in September. The Fed had previously projected a single quarter-percentage-point reduction for this year. The retail sales picture was mixed, with sales at gasoline stations dropping 2.2% and sales at motor vehicles and parts dealers rising 0.8%. Retail sales excluding automobiles, gasoline, building materials, and food services rose 0.4% in May. The downward revision to April's core retail sales suggests moderate consumer spending in the second quarter and could lead to a trimming of GDP growth estimates for the quarter. Evidence suggests that US consumers are pulling back as they face tough economic hurdles. Weaker-than-expected spending over the past few months helps set the stage for the Federal Reserve to begin lowering borrowing costs sometime this year. The timing of the Fed's first rate cut will be primarily determined by what's going on with inflation. Officials say they look at what's happening economy-wide. Retail sales rose 0.1% in May, slightly below expectations, and were 2% higher compared to a year ago. Sales at clothing and accessory stores rose 0.9%, while electronics and appliance stores saw a 0.4% gain. Online sales were up 0.8%. Gas station sales were down 2.2%. Consumer spending, which makes up two-thirds of GDP, has been more cautious due to inflation and tougher credit conditions. The Federal Reserve is anticipating one cut to its benchmark interest rate this year. Some major retail chains have rolled out discounts to entice shoppers to keep spending. Economists predict softer consumer spending trends as cost fatigue and cooling labor market conditions curb income growth. Consumer sentiment has been down, with Americans expecting higher prices to linger and expressing frustration with inflation. Many Americans hold negative beliefs about the economy that contradict the data released by federal agencies. US retail sales for May were disappointing, rising 0.1% month-on-month versus the 0.3% consensus, while April was revised to show a 0.2% contraction rather than the 0% outcome initially reported. Consumer spending is expected to continue cooling through this year as flat real household disposable incomes constrain spending power and pandemic-era accrued savings are exhausted. High consumer credit costs and declining consumer confidence readings are also contributing to a more cautious consumer sector. If consumer cooling continues, along with further rises in the unemployment rate and low core inflation prints, a September rate cut by the Federal Reserve will be on the table for discussion. ING economists favor three rate cuts this year, with the Fed funds target rate reaching 4% in the second quarter of 2025. US industrial production rose 0.9% MoM in May, with manufacturing output rising 0.9% led by a 2.3% surge in machinery production. However, manufacturing orders need to rebound for the manufacturing bounce to be sustained. The ISM manufacturing report has shown a contraction in orders for the past two months, and durable goods orders are growing at a slow rate. The S&P 500 and Nasdaq are hovering near record levels after the failure of retail sales. The disappointing retail sales report shows rising interest rate pressures, with housing-related spending categories continuing to decline in May. Consumer spending is slowing because real income growth has moderated and because some consumers have become credit constrained amid rising interest rates and increased use of credit cards. The Fed indicated it would cut interest rates just once this year, down from the three cuts expected in March. The central bank still expects a strong economy at the end of the year, with the unemployment rate stabilizing at 4% in 2024. The Federal Reserve maintained its previous forecast for US economic growth, with the economy expected to grow at an annual pace of 2.1% this year before falling slightly to 2% in 2025 and remaining at that level until 2026. A top Federal Reserve official has stated that the slowing US retail sales are bolstering the chances of a rate cut. The official's comments come as retail sales in the US have been showing signs of weakness, with a decline in consumer spending. This has raised concerns about the strength of the US economy and has led to speculation that the Federal Reserve may cut interest rates to stimulate growth. The official's remarks indicate that the central bank is closely monitoring the situation and may take action to support the economy. US retail sales rose 0.1% in May, following a 0.2% drop in April. The increase was smaller than expected and likely exaggerated the slowdown in consumer spending. The decline in sales was partly due to lower gasoline prices. Inflation and higher interest rates are testing the resilience of consumers, with households prioritizing essentials and cutting back on discretionary spending. Tepid retail sales bolstered expectations that the Federal Reserve could cut interest rates in September. Manufacturing output increased 0.9% in May, following a 0.4% drop in April. The increase in output was across the board, with durable goods manufacturing production up 0.6% and nondurable manufacturing production up 1.1%. Economists expect growth in manufacturing output to be incremental in the second half of the year. Retail sales declined in May and were downwardly revised for prior months, suggesting the consumer is in trouble. A better picture of consumer spending comes from the personal spending report that includes services, as well as goods. Sales rose just 0.1% from April to May without adjusting for inflation. If we exclude gasoline, sales rose 0.3%. Real retail sales fell just under 1% (inflation-adjusted) over the past year. Real personal spending, which includes services, rose 2.6% over the past year. The retail sales report alone doesn't tell the whole story and consumers are still focusing their spending on services more than goods. The U.S. Pending Home Sales Index dropped by 2.10% in May from -7.70% in April 2024, less than the consensus estimate of 2.5%. The Midwest and South saw monthly losses in transactions, while the Northeast and West recorded gains. On a year-over-year basis, contract signings dropped 6.6%, with all U.S. regions experiencing reductions. NAR Chief Economist Lawrence Yun stated that rising inventory and lower demand suggest easing home price appreciation in the coming months, and more inventory in a job-creating economy will lead to greater home buying, especially with descending mortgage rates.
Hong Kong retail sales dropped 11.5% in May, marking the second consecutive month with a double-digit decrease. Sales shrank to HK$30.5 billion, following a 14.7% decline in April. The poor performance is attributed to changes in consumption patterns of visitors and residents, as well as the strength of the Hong Kong dollar. In the first five months of 2024, retail sales contracted 6.1% from the same period last year. The central government's recently announced measures, including the enhanced individual visit scheme and increased duty-free allowance, are expected to stimulate retail businesses. During the recent long weekend, 1.26 million Hongkongers departed the city, while 345,178 individuals arrived, including 268,069 mainland residents.