What Drove Retail Sales Higher in May?

Retail sales increased 0.8% in May

The United States Census Bureau releases a monthly report on retail sales in the United States. As per the notes on the bureau’s website, it conducts an advance monthly survey of retail trade and food services companies. This report is an early estimate of the sales for the surveyed month.

According to the latest report, which was released on June 14, advance estimates of US retail (XRT) and food services sales for May were $502.0 billion, an increase of 0.8% from the revised April reading of $497.9 billion.

What Drove Retail Sales Higher in May?

Gains were broad-based across sectors

May retail sales growth beat all forecasts and recorded the largest gain of the last seven months. The gains were broad-based across sectors, with ten out of 13 sectors improving in May. The charge was led by sales of building materials (XHB) and sales at gas stations, restaurants, and department stores (RTH). The cherry on the cake was the upward revision to the last two months’ readings.

The takeaway from the May retail sales report

Growth in retail (RETL) sales has been improving at an impressive pace, with trailing-12-month growth now up by 5.9%. If we exclude the volatile auto sector, retail sales growth jumps to 6.4% for the last 12 months. An increase in wages and a decrease in taxes is likely to push consumer spending higher in the months ahead, which could have a strong impact on US economic progress.

The reaction of the markets (VOO) to the spike in retail sales was muted, as investors were more focused on the central bank’s actions in the United States and Europe. In the next article, we’ll discuss why inflation has more room to grow.