U.S. retail sales unexpectedly rose in May as consumers bought motor vehicles and various other goods, which could help support the economy this quarter.
Retail sales rose 0.3% last month after rising 0.4% in April based on a report the Commerce Department said on Thursday. Economists polled by Reuters had forecast sales falling 0.1%.
Retail sales are mostly merchandise and not adjusted for inflation. Food and beverage services are the only service category in the retail sales report.
While inflation and higher interest rates have caused consumers to become more selective and price sensitive, spending has remained resilient, thanks to strong wage gains resulting from a tight labor market.
The Federal Reserve kept interest rates unchanged on Thursday for the first time since March 2022 when the U.S. central bank embarked on the fastest monetary policy tightening campaign in over 40 years. The Fed has raised its policy rate by 500 basis points in this tightening cycle, still expecting a rate hike this year. Fed Chairman Jerome Powell said that the labor market has surprised many "with its extraordinary resilience."
Although the unemployment rate rose to a seven-month high of 3.7% in May, it remains very low by historical standards. Excluding autos, gasoline, building materials and food services, retail sales rose 0.2% last month. Data for April was revised slightly lower to show core retail sales rose 0.6% instead of 0.7% as previously reported.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, expanded at the fastest pace in nearly two years in the first quarter, offsetting the drag on GDP growth from a sharp slowdown in inventories. The economy grew at an annual rate of 1.3% last quarter. The Atlanta Fed now estimates GDP to grow at a rate of 2.2% in the second quarter.
The resilience of the job market was confirmed by a separate report from the Labor Department on Thursday showing initial claims for state jobless benefits were unchanged at a seasonally adjusted 262,0000 for the week ending June 10. Economists polled by Reuters had forecast 249,000 claims for the latest week.
