Strong Economy Boosts Retail Sales to Six-Month High
Boosted by a strong economy, U.S. retail sales rose by the most in six months in May, as consumers spent more at home and garden stores, gas stations and restaurants.
Retail sales rose 0.8 percent last month, the Commerce Department said Thursday, the largest increase since November. Excluding the volatile gas and auto categories, sales also rose 0.8 percent. April’s sales growth was revised higher, from 0.2 percent to 0.4 percent.
Consumers are very confident about the U.S. economy, buoyed by steady job gains, an unemployment rate at an 18-year low, and the Trump administration’s tax cuts. The solid job gains have meant more Americans earning paychecks, and spending them.
Healthier consumer spending is boosting the strong economy after a sluggish first quarter. Analysts forecast growth is likely to reach 4 percent in the April-June quarter, up from 2.2 percent in the first three months of the year.
Sales at home and garden stores jumped 2.4 percent, the most in eight months, and rose 2 percent at gas stations, which mostly reflects higher gas prices.
Despite rising gas prices, Americans spent more at restaurants and bars, as well as at clothing stores, with sales rising 1.3 percent for both.
Inflation, led by this rising gas prices, has picked up, leaving most Americans with no increase in pay last month after higher prices are taken into account. It is not known how long Americans will continue to spend so freely.
Many have dipped into savings. The U.S. saving rate slipped to 3.1 percent in the first three months of the year, down from 3.9 percent a year earlier.
And shoppers are still exhibiting caution — consumer borrowing growth fell to its slowest pace in seven months in April, mostly because a category that includes auto and student loans increased more slowly.
Retail sales are closely watched by economists because they provide an early read on consumer spending, the principal driver of the U.S. economy. Store purchases account for about one-third of U.S. consumer spending. Spending on services, such as landscaping and mobile phones plans, makes up the remaining two-thirds.
The Associated Press contributed to this report.