Priyanka Tiwari
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Suspense crime, Digital Desk : American consumers unexpectedly pulled back on spending in May, a key sign that the U.S. economy may be losing momentum and increasing pressure on the Federal Reserve to consider an interest rate cut later this year.
The Commerce Department reported that retail sales fell by 0.3% last month, a surprising downturn that defied economists' expectations of a modest 0.2% increase. The drop was broad-based, with notable declines in sales at auto dealerships, furniture stores, and building material suppliers.
This slowdown comes after a surge in consumer activity in April, when sales were revised significantly higher to a 0.7% increase. Analysts suggest this pattern points to "tariff anxiety," where consumers rushed to buy big-ticket items like cars and electronics in April to get ahead of potential new tariffs on Chinese goods. The subsequent dip in May reflects a natural pullback after that front-loading of purchases.
While the headline number was weak, a more focused measure known as "core retail sales"—which excludes volatile categories like autos, gasoline, and food—did rise by a solid 0.4%. This suggests some underlying resilience in consumer demand.
However, the overall trend points to an American consumer feeling the squeeze from multiple directions. Stubbornly high inflation, elevated interest rates, and a gradually cooling job market are all weighing on household budgets.
For financial markets, the weak report was seen as good news. The data strengthens the case for the Federal Reserve to cut interest rates to stimulate the economy, with many investors now betting on a rate reduction as early as September. The news caused US Treasury prices to rise and the dollar to fall, classic market reactions to signs of a slowing economy.
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