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  • Writer's pictureRealFacts Editorial Team

Retail Sales Growth Unexpectedly Slows

U.S. Dept of Commerce building

At 8:30 a.m. ET on Tuesday, the Commerce Department released the retail sales figures for May. Before the report, economists had projected a 0.3% increase for both the overall numbers and those excluding autos and gas. The actual figures fell short of expectations, with overall retail sales rising only 0.1% and sales excluding autos and gas decreasing by 0.1%. Additionally, April's retail sales were revised down to a -0.2% monthly change from the initial flat reading. Excluding autos and gas, April's numbers were revised down to -0.1% from the originally reported 0.2% increase.

Year-over-year, overall sales in May rose by 2.3%, down from April's revised 2.7% growth, which was previously reported as 3%. These slowing figures have raised concerns about the strength of the U.S. consumer. Jed Graham, a writer for Investors Business Daily, examined the underlying factors contributing to this slowdown. He noted, “Areas of weakness included sales at food services and drinking places (-0.4%), furniture stores (-1.1%), grocery stores (-0.4%), and department stores (unchanged).”

These weaknesses may be attributed to consumers becoming more price-sensitive due to increased borrowing costs resulting from the Fed's higher-for-longer interest rate policy. The slowdown in retail sales and the potential weakening of consumer spending have led investors to price in a 68% chance of a rate cut by the Fed at their September 18 meeting, up from 61.5% before the report. Additionally, Wall Street now sees a 69% chance of two quarter-point rate cuts this year, up from the previous 62%. The increased likelihood of rate cuts boosted investor confidence, pushing the S&P 500 up by 0.2% in early morning trading.


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