- Retail and food services sales rose 0.9% month-over-month (m/m) in May, ahead of consensus expectations for a 0.5% gain. Higher prices were once again part of the story but not all of it, with inflation-adjusted retail and food services sales up 0.4% m/m.
- Nominal sales at gasoline stations rose 3.4% m/m due to higher prices at the pump. Sales of autos and parts also posted a sizeable gain (+1.2% m/m), reversing a decline the prior month, while sales at building materials and garden retailers were flat.
- Looking at the “control group”—which excludes volatile sales of gasoline, autos and parts, and building materials and garden equipment—sales posted a solid 0.7% m/m gain, also ahead of expectations. There were notable gains at miscellaneous store retailers (+2.3% m/m), furniture and home furnishings stores (+1.0% m/m), and health and personal care stores (+0.6% m/m). However, sales were flat at food and beverage stores and edged lower at electronics and appliance stores (-0.5%), although the decline followed seven consecutive months of gains. Gains were modest elsewhere. Sales at non-store retailers, mostly online sales, posted another solid monthly increase (+1.5% m/m), and were up 12.2% from a year-ago.
- Spending at bars and restaurants – the only service category included in the report – edged lower by 0.1% m/m in May after a solid gain in April. Zooming out on the longer-trend, spending on dining out is up only 2.7% y/y, down from 6.4% growth in May 2025.
Key Implications
- This was a strong report, with both headline and core sales coming in above expectations. Unlike in April, the gain was not only driven by higher prices, with sales volumes also posting a solid increase in real terms. To be fair, higher gasoline prices remained a factor, but spending also received a meaningful lift from stronger vehicle sales and sizeable gains across several other categories. Even with real disposable income falling — in April, it was 1% lower than a year earlier — and pump prices still elevated, consumers appeared undeterred in May, perhaps dipping further into savings or leaning more heavily on credit cards. That said, some signs of hesitancy remained, including flat sales at food stores and softer spending at bars and restaurants.
- Looking ahead, the worst of the gas price increases appear to be in the rear-view mirror. With gas prices down by roughly 50 cents in June on U.S.-Iran peace progress, households will get some modest reprieve from lower prices at the pump (commentary). The labor market also appears to be showing some signs of strengthening (commentary), while household wealth continues to be supported by rising equity valuations. This should help to sustain consumer spending at around a 2% pace through year-end.
 in May...){kind=link}