U.S. retail sales registered a bigger-than-expected drop in May as motor vehicle sales plunged and record gasoline prices prompted households to cut back spending on other items.
The Commerce Department said Wednesday that retail sales fell 0.3% last month, down sharply from April's downwardly revised 0.7% increase, following 0.9% initially reported. May's print also marked the first decline in five months. Economists surveyed by Bloomberg expected the latest data to show a rise of 0.1%.
"Consumers pulled back on their spending in May as [a] price shock has curbed their enthusiasm," FWDBONDS Chief Economist Christopher Rupkey said.
Weakness in May's print was led by a slowdown in car purchases as vehicles and borrowing got more expensive. Sales at motor vehicle and parts dealers fell 3.5% in May. Without the autos component of the report, retail sales rose 0.5% during the month.
Spending at gas stations was up 4%, with last month's sales rising 43.2% against the prior year. Gas prices topped $5 per gallon nationwide last week, according to the latest data from AAA.
Excluding autos and gas, the pace of retail sales slowed to a 0.1% gain in May, compared to 0.8% the prior month.
Data also showed a dramatic slowdown in online shopping, with a 0.1% decline in activity during the month of May compared to the prior month's 0.7% increase.
Sales at restaurants, bars and other food and drinking places were a bright spot in the report, underscoring the recent shift in spending from goods to services among U.S. consumers amid pent-up demand from the pandemic.
The cut back on spending comes as inflation continues to climb steadily and consumer confidence retreats.
U.S. consumer prices accelerated 8.6% in May at the fastest rate since 1981, as Americans grapple with a surge in the cost of gas, food, and shelter, data showed Friday. At the same time, consumer sentiment sank to its worst level on record in early June as higher prices on everyday items dampen the outlook among Americans.
(This post is breaking. Please check back for updates.)
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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