WASHINGTON, DC—Retail sales in May posted their biggest monthly drop since January 2016, according to Census Bureau data released Wednesday. News of the 0.3% sales decline from April comes amid concerns that the economic recovery might not be strong enough after all for continued interest rate hikes by the Federal Reserve.

Sales for May, adjusted for seasonal variation, reached $473.8 billion nationwide, the federal government said Wednesday. That represents a 3.8% increase from the year-ago period. Sales for the March-through-May period were up 4.4% from the same period in '16. April sales were up 0.4% from March.

A closer look at Census Bureau data show winners and losers. The building supply sector, for instance, posted a 10.8% increase on a year-over-year basis although it was flat month over month, while nonstore retailers—including, but not limited to, e-commerce channels—were up 10.2%.

On a year-to-date basis, sales in department stores were off 3.7% from a year ago, and down 1.0% in May from April levels. Electronics and appliances stores were down 1.8% Y-O-Y and 2.8% compared to April.

Despite the dreary retail news, economists told Reuters and Marketwatch on Wednesday that the Fed was unlikely to back off from raising rates at Wednesday's meeting, although the frequency of additional increases later this year is now called into question. “The action the Fed is likely to take later today has already been well justified and well previewed,” Carl Tannenbaum, chief economist at Northern Trust, told Marketwatch.

Separately, the Bureau of Labor Statistics announced Wednesday that the Consumer Price Index slipped 0.1% in May on a seasonally adjusted basis. It was up 1.9% Y-O-Y.

A decrease in the energy index was the main contributor to the monthly decrease across the board, according to BLS data. The energy index fell 2.7%, led by a decline of 6.4% in gasoline prices. The food index rose 0.2%, due to increases in four of the six major grocery store food group indexes.

Instant Insights /

Retail Sales Post Biggest Drop in 16 Months

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