US retail sales were weaker than expected in the past two months, leading to louder calls for a sooner cut to interest rates from the US Federal Reserve.
Retail sales rose 0.1% in May compared to the preceding month, according to new and revised data from the US Census Bureau, whiwhc was below the 0.2% rise expected.
April’s figure was also revised down to a 0.2% monthly decline from a flat reading initially.
Motor vehicle sales rebounded 0.8%, helping offset a price-related 2.2% decline in gas station sales, with building material sales also weak amid unseasonably wet weather in the west, with spending also down at restaurants and bars.
The modest rise in retail sales in May and the downward revisions to previous months puts real consumer spending on track for a slowdown in the second quarter of 2024, economists said.
"Maybe households aren't quite as impervious to higher interest rates as we were beginning to believe," said Paul Ashworth, chief North America economist at Capital Economics.
"Admittedly, we don't expect a full-blown slump in consumption but, at the margin, even a modest slowdown in consumption growth and consequently GDP growth too could be enough to tip a finely balanced Fed in favor of a rate cut in September."
Michael Pearce at Oxford Economics said he now expects the annualised growth of 2% in consumption seen in the first quarter to slow to 1.8% in the second quarter.
"Consumer spending is slowing because real incomes growth is moderating and because some consumers are becoming credit constrained amid elevated interest rates and rising credit card utilization," Pearce said.
"However, with unemployment unlikely to rise much and the state of households balance sheets still looking strong in aggregate, we expect consumer spending growth will remain close to its current pace in the second half of the year."