Source: Jin10 Data
The May retail sales report was weaker than expected, which may provide a reason for the Fed to cut interest rates in September.
Due to high interest rates and continued inflation pressure on consumers, US retail sales in May increased by only 0.1%, lower than economists' expectations of 0.3%. Revised data from the Commerce Department also showed that retail sales fell slightly by 0.2% in April.
Paul Ashworth, chief North American economist at Capital Economics, pointed out that Tuesday's weak retail sales data further indicates that "consumers are facing some difficulties." The data supports our view that the GDP growth in the second quarter is still weak after a disappointing first quarter.
Michael Pierce, deputy chief US economist at Oxford Economics, wrote in a client report: "Consumer spending is slowing down as real income growth slows down and some consumers' credit is constrained due to rising interest rates and credit card usage."
According to the report, gas station sales fell the most, down 2.2% from the previous month. Furniture and houseware stores also lagged behind, with sales down 1.1%. At the same time, sporting goods and hobby stores saw the most significant increase in sales, up 2.8% from the previous month.
However, overall, the data on US consumer spending remains mixed. In May, the control group for retail sales (used to calculate GDP, excluding volatile categories such as cars, gas stations, and building materials) rose 0.4%.
Matthew Luzzetti, chief US economist at Deutsche Bank, said this was "good data." Luzzetti said that over the past three months, the control group had recorded its largest increase since December.
Luzzetti said, "Consumption is indeed slowing down, but I don't think this is a worrying trend at the moment. I think it is only returning to the more normal economic growth we thought."
Economists and analysts say that weaker-than-expected retail sales reports for May may help support a Fed rate cut in September.
"We expect that consumption will not decline across the board, but from a marginal perspective, even if consumption growth only slows down slightly (GDP growth is expected to slow down accordingly), it is enough for the Fed to choose to cut interest rates in September," Ashworth wrote in a report.
Less than a week ago, the latest economic forecast summary (SEP) released by the Fed showed that the Fed expects to cut interest rates once this year. As the Fed expects to maintain high interest rates for longer, economists are increasingly concerned that restrictive policies could cause a sharp slowdown in the US economy.
Mohamed El-Erian, chief economic adviser at Allianz, said in an interview with Yahoo Finance on June 13 that if the Fed waits until December to cut interest rates, the risk is "too late" and the economic slowdown will be greater than it should be.
In the past week, expectations for a Fed rate cut in September have continued to rise. After Tuesday's retail sales data was released, according to CME Group's FedWatch tool, the probability of a Fed rate cut of at least 25 basis points in September was around 67%, up from around 61.5% on Monday.
Editor/tolk