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Investing.com - U.S. retail sales sank by more than anticipated in May, in a possible sign of consumer wariness during a time of wider trade uncertainties.
Retail sales last month fell by 0.9%, deeper than a decline of 0.5% predicted by economists, data from the U.S. Census Bureau showed on Tuesday. The month-on-month figure for April was downwardly revised, showing a contraction of 0.1% after an initial reading of 0.1% growth.
Writing in a note to clients, analysts at Vital Knowledge noted that automotive and gas sales drove a "bulk of the sequential weakness in the retail sales," adding that the details of the report "aren’t as bleak as they seem."
The data comes as shoppers and businesses have fretted over whether President Donald Trump’s sweeping tariffs will drive up inflationary pressures and weigh on broader economic activity.
Despite ongoing anxiety over Trump’s aggressive tariff agenda, U.S. consumer sentiment improved for the first time in six months in June thanks to hopes for a trade détente between the U.S. and China, a survey from the University of Michigan showed last week.
Still, fears remain that, should recent geopolitical tensions cloud over sentiment and lead to a sustained jump in oil prices, the improvement could be short-lived.
These worries could factor into how the Federal Reserve approaches its upcoming interest rate decision following the conclusion of its latest two-day gathering on Wednesday. The Fed is tipped to leave rates unchanged at a range of 4.25% to 4.5%, while policymakers are expected to stick to their recent wait-and-see attitude to future potential borrowing cost changes.
Fed officials have previously argued that it makes sense to adopt this stance until more clarity emerges around the effect of both Trump’s tariffs and his fiscal policies. Trump, meanwhile, has repeatedly called for the Fed to slash rates.
"Taking a step back, we think [the] May economic data in aggregate strengthens the case somewhat for the Fed to pivot its forward guidance in a slightly dovish direction, although [Fed Chair Jerome] Powell might not alter his language dramatically [...] just because there is still so much uncertainty around tariffs and other government policies," the Vital Knowledge analysts said.