On Wednesday, the Commerce Department said that retail sales declined 0.3%, which was the first decline since February and biggest drop in 16 months since January 2016. Economists expected sales to rise slightly in May.
The drop in retail sales was a cautionary sign for the economy. Americans cut spending at department stores, gas stations, and electronics shops in May. At electronics stores, sales fell 2.8%, which is the biggest drop since March 2016. Sales dropped 2.4% at gas stations, and 1% at department stores.
Excluding automobiles, gasoline, building materials and foodservices, retail sales were unchanged in May after an upwardly revised 0.6% increase in April. Core retail sales are related most closely to the consumer spending component of GDP, and were reported to increase 0.2% in April.
“The retail sales report for May was disappointing. Some of the softness was because of lower gasoline prices … but details were generally soft,” said Gus Faucher, a senior vice president and chief economist at The PNC Financial Services Group.
Economists said that they expected consumer spending to pick up in spring and summer. The drop of consumer spending early this year is a crucial reason that the economy expanded at 1.2% annual pace in January through March.