US "horror data" in May sees almost zero growth, supporting the prospect of Fed rate cuts again
US retail sales in May nearly flatlined, with data revised downward, indicating increased financial pressure on consumers. Economists predict that due to inflation and the state of the job market, American consumers will become more cautious, with future spending maintaining a moderate pace. The Federal Reserve may cut interest rates. The GDP calculation indicator for retail sales control group rose by 0.4%, after a 0.5% decline in the previous month. Consumer borrowing data shows that rising household debt costs have led to an increase in credit card balances. Following the release of the data, US Treasury yields declined
According to the Zhitong Finance and Economics APP, the so-called "terrifying data" of US retail sales in May showed almost no growth, and the data for the previous months was revised downward, indicating greater financial pressure on consumers. Data released by the US Department of Commerce on Tuesday showed that retail sales, excluding inflation adjustments, only increased by 0.1% month-on-month, lower than the expected 0.3%, with the previous month's retail sales rate revised downward to -0.2%. Excluding gasoline, retail sales increased by 0.3%.
Among the 13 categories tracked by the US Department of Commerce, 5 categories saw declines, attributed to lower gasoline prices for the month and furniture stores offering discounts during the Memorial Day weekend.
These data highlight a significant drop in consumer spending after stronger data was released earlier this year. Economists expect that due to ongoing inflation, a cooling job market, and signs of new financial pressures, American consumers will be more cautious, and future spending will remain moderate.
Paul Ashworth, Chief North American Economist at Capital Economics, stated in a report, "With slowing growth in service consumption in recent months, consumer confidence has plummeted again, perhaps households are not as immune to higher interest rates as we initially believed."
Data released last week showed that both US consumer and producer prices in May were lower than expected, which will help boost the confidence of the Federal Reserve that they can quickly lower interest rates. Following the decision to keep rates unchanged last week, Federal Reserve Chairman Powell stated that consumer spending continues to grow steadily, and the household sector is "quite good."
After the data was released, US Treasury yields fell as the report suggested that economic weakness might prompt the Fed to start cutting rates.
In other data, the control group for retail sales used to calculate Gross Domestic Product (GDP) rose by 0.4% in May, after a 0.5% decline the previous month, marking the largest drop in about a year. This indicator excludes food services, auto dealers, building material stores, and gas stations.
Another consumer lending data released earlier this month showed that due to rising household debt costs, credit card balances saw their first decline in three years, while default rates continued to rise. This also had an impact on market sentiment.
Retail sales data mainly reflect goods spending, which accounts for a relatively small proportion of overall consumer spending. Data to be released later this month will provide more details on May's inflation-adjusted goods and services spending The only service category in Tuesday's report, restaurant and bar spending, fell by 0.4%, the largest decline since January