US Retail Sales Post First Drop in Five Months as Auto Purchases Plunge

US retail sales fell in May for the first time in five months, restrained by a plunge in auto purchases and other big-ticket items, suggesting moderating demand for goods amid decades-high inflation.

The value of overall retail purchases decreased 0.3%, after a downwardly revised 0.7% gain in April, Commerce Department figures showed Wednesday. Excluding vehicles, sales rose 0.5% last month. The figures aren’t adjusted for inflation.

The median estimate in a Bloomberg survey of economists called for a 0.1% advance in overall retail sales from a month earlier and a 0.7% increase in the figure excluding autos.

Auto sales dropped 3.5% in May, reinforcing data from Wards Automotive Group that showed sales fell the most since August in the month. Meantime, spending at gas stations climbed 4%, likely reflecting higher fuel prices in the month. Excluding those categories, retail sales rose 0.1%, the smallest gain in five months.

The figures suggest that Americans’ demand for merchandise is softening, which could reflect the impact of the fastest inflation in 40 years or greater preference to spend to on services like travel and entertainment. As price pressures become more entrenched in the economy, spending will likely ebb either due to higher prices, higher interest rates, or both.