US retail sales unexpectedly drop in May

US retail sales unexpectedly fell in May, to their lowest since January 2016, according to data from the Commerce Department.

Sales were down 0.3% on the month to $473.8bn, versus expectations for a 0.1% increase and following a 0.4% jump in April. Excluding autos, gasoline, building materials and food services, sales were flat on the month following an upwardly-revised 0.6% gain the month before. Economists had been expecting a 0.3% gain.

Auto sales were down 0.2% following a 0.5% rise in April, while department store sales fell 1%, marking their biggest drop since July last year, and sales at gasoline stations slumped 2.4%.

On the year, retail sales were up 3.8%.

Andrew Hunter, US economist at Capital Economics, said: "A good part of the weakness in headline retail sales can be explained by the 2.4% month-on-month decline in the nominal value of gasoline station sales, stemming from the 6% m/m fall in retail gasoline prices last month. Auto sales were also weak, falling by 0.2% m/m. But, more generally, vehicle sales now look to have stabilised after the sharp falls in the first quarter.

"The upshot is that, despite the weakness of the headline numbers, the May retail sales data actually provide further reason to expect real consumption growth to pick up to between 2.5% and 3.0% annualised in the second quarter. And with consumer confidence at multi-year highs and real income growth rebounding markedly in recent months, spending growth looks set to continue at a healthy pace over the rest of this year."