U.S. Retail Spending Continues to Rise in May

Even though we couldn’t be further removed from the holiday season, it seems Americans are ready to shop. As CNN Money reports, retail sales rose 0.8% in May. Not only did that figure best many estimates but also marked the largest gain in six months. Furthermore spending was up an impressive 5.9% over last year. While this is certainly good news for brick-and-mortar retailers that have been famously struggling in recent years, it’s also a strong signal of consumer confidence.

Speaking of brick-and-mortar stores, spending growth among these locations actually outpaced “nonstore retailers” such as Amazon. In particular sales were strong among clothing stores, home improvement outlets, and at restaurants. Meanwhile sales slumped at furniture stores, falling 2.4% according to the report.

The larger-than-expected boost is welcome news after a slow start to the year. One theory for the slow start is that Americans were waiting to see if the Republican-backed tax bill would make it through Congress before opening their wallets. Of course tax refund checks may have also played a role in getting consumers to stores as well.

Overall the rise in spending is a good sign for the U.S. economy. In fact the latest numbers have convinced Barclays to up their estimates to suggest the economy will grow by 3.5% in 2018 instead of 3%. On the other hand, this news comes on the heels of the Federal Reserve raising interest rates a quarter-point. Moreover it now seems like the Fed will raise rates twice more this year, bringing the total number of hikes to four.

In regards to whether Fed rate hikes could interfere with consumer spending, Citizens Bank global markets head Tony Bedikian told CNN Money that he doesn’t believe they will “as long as the Fed doesn’t raise rates too quickly.” He went on to say that consumerd will continue to shop “as long as they have jobs and wages are rising.” However he notes that the larger threat to spending are the tariffs being instated on products from China, Canada, Mexico, the European Union, and elsewhere.

There’s no doubt that increased retail spending and growing consumer confidence are positive signs for the economy. At the same time, with trade wars looming large on several fronts, this encouraging trend could quickly start to reverse itself. On a smaller level, Fed rate hikes could also serve to cool consumer spending — especially if shoppers are taking on debt to finance their purchases. Thus it’ll be interesting to see how spending is impacted in the coming months.

Author

Jonathan Dyer

I'm a small town guy living in Los Angeles looking to make solid financial decisions. I write for a number of finance websites, including HuffingtonPost and Business2Community. I founded DyerNews.com in 2015 to focus on personal finance and the emerging FinTech markets.

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