U.S. consumers continued to open their wallets in May, pushing retail sales up at the fastest pace seen in six months and fueling hopes for second-quarter economic growth despite rising gasoline prices.
Nationwide retail sales ticked up by 0.8 percent between April and May, according to the U.S. Commerce Department, beating market expectations for a 0.4 percent increase and pushing year-over-year growth up to 5.9 percent.
“Retail sales have been on a winning streak since March. It is clear that the consumer spending slowdown of the first two months of the year is over,” said Chris Christopher Jr., executive director of IHS Markit.
“All of this is indicating that lower taxes, better job prospects, elevated levels of consumer optimism and increasing household net worth are assisting many Americans in opening their wallets wider,” he said.
This was the biggest monthly gain since November, driven by strong sales across most sectors. Only sporting goods and furniture retailers witnessed declines.
The biggest monthly winners were car manufacturers, building and garden supply stores, restaurants and bars, and gasoline stations, where rising prices at the pump led to a 2 percent sales increase.
Apparel and accessories specialty stores sales saw a 1.3 percent rise in monthly sales, while department stores also had their best month since January 2017 with a 1.5 percent increase. This was the third month in a row the sector enjoyed growth.
The sales increases add to a growing number of data points showing the economy is gaining momentum and will no doubt spur on hopes for second quarter GDP and encourage the Federal Reserve, which wants to gradually wean the U.S. off easy monetary policies without harming the recovery.
On Wednesday, the Fed raised interest rates by a quarter point to 2 percent and signaled that there would be another two increases this year and three more in 2019 as it predicted that growth will hit 2.8 percent in 2018, up slightly from its previous 2.7 percent prediction.
Inflation, meanwhile, is set to run at a pace of 2.1 percent for the next three years, a touch over the Fed’s official 2 percent target, although this doesn’t seem to be bothering policymakers for now.
At the same time, retail sales figures were also released in the U.K. showed volumes were 1.3 percent higher in May compared with April, while year-on-year growth was 3.9 percent.
According to the U.K.’s Office for National Statistics, the second-hottest May on record and Royal Wedding celebrations led to increased spending on food and drink, summer clothes and garden furniture.
The sales increases should offer some relief to retailers, many of whom have had to cut staff and closed stores given the longer-term migration to e-commerce, cost-conscious consumers and several months of bad weather.
Ian Gilmartin, head of retail at Barclays corporate banking, said: “We’re not going to have a heat wave and a royal wedding to help drive sales every month, but the World Cup kick-off should help supermarkets, in particular, maintain this momentum over the next month or so.”
Online spending for food, department and clothing stores continued to increase, achieving new record proportions of online retailing in May at 5.8 percent, 17.4 percent and 17.6 percent, respectively, according to the ONS.
In particular, the proportion of online spending in apparel stores has grown at a much faster rate in the last 14 months, from 14.7 percent in March 2017 to 17.6 percent in May.
In China, retail sales growth outstripped gains in the West, but still marked a slowdown. Chinese retail sales rose by 8.5 percent in the year to May, lower than April’s 9.4 percent. This was partly driven by weaker car sales.