Momentum seeped out of retail in May as inflation prompted more consumers to adjusted their spending.
Retail and food service sales fell a seasonally adjusted 0.3 percent from April, according to the Census Bureau’s latest reading on consumer spending.
Sales were still up 8.1 percent from a year earlier with consumers venturing out more despite COVID-19, but the month-to-month slowdown suggests the economic whirlwind of higher prices — fed by supply chain backups and war in Ukraine — is hitting consumers.
Most fashion retailers appeared to be holding on to gains for now, however.
May department store sales rose 0.9 percent both compared with April and a year ago. And apparel and accessories specialty stores inched up 0.1 percent compared with April and were up 6.1 percent from a year earlier.
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But with prices rising at a rate not seen in 40 years and Wall Street now officially in bear market territory, the concern is that a recession that could hurt everybody is in the offing.
“It looks like inflation has finally caught up to consumers and they are starting to pull back on their spending,” said Natalie Kotlyar, national leader of BDO’s Retail & Consumer Products practice. “Given that the monthly retail sales data is not adjusted for inflation, this decline means that consumers are spending significantly less than we would expect to see at a normal inflation rate of 2 percent to 3 percent. As we head into the summer months, and as gas prices remain high, we will see if consumers pull back on summer travel and discretionary spending. The federal reserve also plans to continue to raise interest rates, but we will watch to see if a sharp increase triggers higher unemployment and thus, further declines in consumer spending.”
The lower end of the price spectrum, where Walmart and Target operate, showed strain during the last round of quarterly financial reports while companies selling more expensive styles were more insulated.
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