U.S. retail sales increased by 0.9% in May, surpassing the median forecast and marking a larger advance than previously reported for April, the Commerce Department's Census Bureau said on Wednesday. April's gain was revised to a 0.4% rise.
Economists polled by Reuters had expected retail sales - which largely measure goods and are reported before adjusting for inflation - to climb 0.5% in May following an initially reported 0.5% increase in April. Some of May's upward momentum reflected stronger receipts at service stations as gasoline prices climbed.
Higher pump prices, which rose to four-year highs amid the U.S.-Israeli war with Iran, contributed to the lift in spending at gas stations. Those prices have since stepped back, with the national retail average dipping below $4 a gallon this week for the first time since April. Separately, the U.S. and Iran on Sunday said they had agreed terms to end the war and reopen the Strait of Hormuz.
The boost to household spending from larger-than-usual tax refunds has helped sustain retail activity in recent months, alongside gains in the stock market, but that support is fading and consumers have been drawing down savings. The personal saving rate fell to a four-year low in April.
On the policy front, the retail sales figures are unlikely to force an immediate change in Federal Reserve action. The Fed was expected later on Wednesday to maintain its benchmark overnight interest rate in the 3.50% to 3.75% range. While rising price pressures have increased the odds of a rate hike in some market discussions, economists cited in the report do not expect the central bank to tighten policy this year, noting the role of easing oil prices in moderating inflation risks.
Looking at a finer slice of consumer demand, retail sales excluding automobiles, gasoline, building materials and food services - a measure commonly called core retail sales because it maps most closely to the consumer spending component of gross domestic product - rose 0.7% in May. That followed an unrevised 0.5% increase in April.
Analysts noted the seasonal pattern to tax refunds: the filing season has ended and a large portion of the refunds that buoyed spring spending is now depleted. Economists at PNC Financial pointed to their internal data, observing that "households are spending down refunds more quickly than in prior years, with higher gas outlays accounting for much of the difference."
PNC added that this effect was "especially pronounced for households in the bottom quartile by refund size, which have drawn down more than 60% of their refunds in 2026 versus 43% at the same point last year."
Broadly speaking, consumer spending - which makes up more than two-thirds of U.S. economic activity - expanded at a 1.4% annualized rate in the first quarter. The overall economy grew at a 1.6% pace last quarter. Tracking the current quarter, the Atlanta Federal Reserve's GDP tracker projects growth at a 2.8% annualized rate.
Key takeaways from the report include a solid headline increase in retail sales for May, a notable contribution from gasoline station receipts, and a continued downward drag on household saving as refunds and market gains are spent.