U.S. retail sales unexpectedly reported a sharp fall in May as motor vehicle purchases declined amid supply shortages, and high gasoline prices have caused consumers to channel spending into other items.
U.S. retail sales falling for the first time in five months this May also carries an indication that the economy is growing more slowly faster than the Fed expected. Retail sales fell 0.3% in May as reported by the Commerce Department on Wednesday. Data in April was revised lower, showing an increase in sales falling from 0.9% to 0.7%.
The May reading also fell short of the expectations of economists who expect retail sales to rise 0.2%. For core retail sales excluding some components of the index rose 0.5%, less than the 0.8% expected. The report also showed that sales growth slowed to 8.1% per annum.
It should be noted that the national average price of gasoline jumped to an all -time high of $ 4,439 a barrel in May. The decline in retail sales also reflected the shift from spending on goods to services.
Annual consumer prices rose the most in nearly 40-1/2 years in May. With inflation eroding wage increases, consumers are turning to accumulated savings and at the same time taking out loans to keep up with spending.
Retail sales are likely to remain sluggish as the Federal Reserve aggressively tightens monetary policy to cool demand and bring inflation back to the 2%target. U.S. central bank is expected to raise its policy interest rates early Thursday morning, with an expected increase of between 0.5% to 0.75%.
The U.S. dollar index, which measures the U.S. dollar against six major currencies, traded higher after the report was released.
