Portugal Colonial - US retail sales beat expectations in May as energy costs stay high

Sales were up 0.9 percent from April at $763.7 billion, the Department of Commerce said.

This was a bigger jump than the 0.5 percent rise that economists surveyed by the Dow Jones Newswires and The Wall Street Journal expected.

From a year ago, total sales in May were up 6.9 percent, the report said.

The figures are not adjusted for inflation, which has risen sharply since US-Israeli strikes targeting Iran in late February sparked Tehran's retaliation in virtually closing off the Strait of Hormuz.

The waterway is a critical route for energy transit, sending oil prices rocketing. Costs at the pump in the United States have risen as well, piling pressure on American households ahead of midterm elections this year.

"Consumption regained some momentum over the spring, but the sugar rush from bigger-than-usual tax refunds will wear off soon," warned economist Samuel Tombs of Pantheon Macroeconomics.

Despite a third of the headline increase being driven by sales at gasoline stations, "underlying retail sales were robust too," Tombs said.

But a 0.1-percent dip in food services sales could reflect that people are opting to drive less -- a foreboding sign for broader spending in the services sector.

Similarly, an uptick in spending at nonstore retailers might also suggest that shoppers are trying to conserve gasoline, he added.

Sales at grocery stores were flat in May while consumers pulled back at restaurants and bars, data showed.

In contrast, sales at gas stations climbed 3.4 percent on a month-on-month basis, and soared 26.5 percent from May 2025.

US consumers have been an important driver of the world's biggest economy, continuing to spend even as prices climbed.

"It seems like we should be able to hold off on the recession for this year, especially if the war is coming to an end," said George Washington University assistant professor Pao-Lin Tien.

"That's only going to boost the stock market even further, and that tends to fuel consumption as well," she told AFP.

However solid demand would make it more challenging for new Federal Reserve chairman Kevin Warsh to advocate for lower interest rates, which tend to boost economic activity, she noted.

Warsh is due to hold his first press briefing at the helm of the US central bank Wednesday afternoon, following a two-day meeting on interest rates.

E.Paulino--PC