Sales at U.S. retailers picked up in May, a sign households are finally willing to put the gains from continued job growth and lower fuel prices to work.
The 1.2 percent increase matched the median forecast of economists surveyed by Bloomberg and followed a 0.2 percent advance in April, Commerce Department figures showed Thursday in Washington. The gain was broad-based with 11 of 13 major categories gaining.
The data show American consumers are ready to spend on more than just automobiles, unlocking months of savings from cheap gasoline and higher incomes as the labor market improves. A pickup in purchases — accompanied by faster wage gains — would burnish the outlook for growth this year.
“It is a bounceback,” Laura Rosner, a U.S. economist at BNP Paribas in New York, said before the report. “The outlook for consumer spending is still quite positive, and consumer fundamentals remain very solid.”
Estimates in the Bloomberg survey of 85 economists ranged from gains of 0.4 percent to 1.9 percent. April retail sales were previously reported as little changed. March data were revised up to show an increase of 1.5 percent from a previously reported 1.1 percent advance.
Other reports Thursday showed claims for jobless benefits remained below 300,000 for the 14th straight week, and the cost of imported goods rose in May for the first time in almost a year as fuel prices rebounded.
Sales at auto dealers, clothing and building material stores were among the biggest gainers last month, according to the Commerce Department’s report.
Sales climbed 2 percent at automobile dealers last month, after rising 0.7 percent in April.
Industry data from Ward’s Automotive Group issued earlier this month showed cars and light trucks sold at a 17.7 million annualized rate in May, the strongest pace since July 2005.
Memorial Day promotions drew Americans to dealerships, while an improved job marked also had consumers heading to showrooms and paying higher prices by taking out longer loans. General Motors Co. and Fiat Chrysler reported bigger sales increases than analysts had anticipated.
Retail sales excluding autos increased 1 percent, the Commerce Department report showed. They were projected to rise 0.8 percent, according to the Bloomberg survey median. It followed a 0.1 percent gain in April.
The figures used to calculate gross domestic product, which exclude categories such as food services, auto dealers, home-improvement stores and service stations, increased 0.7 percent in May after rising 0.1 percent the month before. The reading for March was revised up to show a 0.9 percent gain compared with a previously reported 0.5 percent advance, which should boost first-quarter consumer spending when the figures are updated later this month.
Today’s figures also shore up growth prospects for the second quarter after unusually harsh winter weather, delays related to a labor dispute at West Coast ports and a stronger dollar caused the economy to contract in the first quarter.
GDP fell at a 0.7 percent annualized rate from January through March. Household consumption climbed at a 1.8 percent pace, less than half the 4.4 percent clocked in the previous three months.
Economists surveyed by Bloomberg last month projected consumer spending to accelerate to a 3.2 percent pace in the second quarter.
Prior data showed consumers were still hesitant to boost outlays, with purchases stalling in April as Americans used income gains to shore up savings.
“While we’re encouraged by strong Memorial Day sales reports from our customers, inconsistent and sluggish retail conditions on a day-in and day-out basis had caused demand for our products to be relatively flat throughout the first quarter and during the first four weeks of the current quarter,” Paul Toms, chief executive officer at Hooker Furniture Corp. said in a June 4 earnings call. “Longer term, we’ll remain optimistic.”
Weak spending has also affected consumer lenders, such as Bank of America Corp.
“On consumer spending, what we see is a little bit sluggish, particularly in the credit card space as people have deleveraged,” Dean Athanasia, co-head of consumer banking at Bank of America, said at a June 3 industry conference. “They’re not overspending. They saved money from gas I think.”
The average cost of a gallon of regular gasoline was $2.75 on June 9, compared to $3.64 percent a year ago. It fell as low as $2.03 in January.
The recent rise in fuel costs propelled a 3.7 percent jump in receipts at service stations in May, the biggest increase since February 2013, Thursday’s Commerce Department figures showed.
Stronger job and wage gains such as those seen in May will be needed to help ensure Americans continue to boost spending in the months to come. Payrolls climbed by 280,000 in May, the biggest gain since December, while hourly pay rose 2.3 percent from the year before, the most since August 2013.
© Copyright 2023 Bloomberg News. All rights reserved.