American consumers and employers are not cooperating with the notion that low unemployment will translate into rising consumption and improving salaries and wages.
U.S. retail sales saw their largest drop in more than a year in May, reported the Commerce Department on Wednesday and real weekly earnings were unchanged, according to the Bureau of Labor Statistics, both had been expected to rise.
Retail sales fell 0.3 percent last month after an unrevised revised 0.4 percent gain in April. The median forecast was for a 0.2 percent rise. Sales were 3.8 percent higher on the year in May, down from April’s 4.6 percent increase and 4.8 percent in March. The yearly increase in sales has been declining since reaching a five year peak of 5.6 percent in January.
Retail sales figures are not corrected for price changes and some of the decline in purchases in May was due to lower gasoline prices. It was the biggest monthly drop since January 2016.
Real weekly earnings rose 0.3 percent in May as they did in April, The 12 month moving average has recovered slightly in the last three months after having touched a two year low in January and February of -0.05 percent. But May’s 0.042 percent average increase remains well below the six hear high of 0.233 percent in February 2015.
Core retail sales which exclude automobiles, gasoline, building materials and food services, were flat last month after an upwardly revised 0.6 percent gain in April that had originally been reported at 0.2 percent.
These 'core’ retail sales mimic the consumption component of the government’s gross domestic product calculation and are considered a proxy for the two-thirds of U.S. economic activity dependent on consumer spending.
The U.S. economy expanded at a 1.2 percent annual pace in the first quarter following a 2.1 percent rate in the prior three months.
The Atlanta Federal Reserve boosted its GDPNow estimate for second quarter growth to 3.2 percent today from 3.0 percent on June 9th citing an increase in consumer spending.
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