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Consumers spent 0.3 percent less in May on retail and food-service purchases than in April, confounding analysts’ prediction of a 0.1-percent gain and notching the first monthly decline in consumer spending this year.
April’s spending edged up 0.7 percent, month on month.
May sales actually rose 0.5 percent when vehicle purchases were excluded from the calculation, also below an expected 0.8-percent increase. Excluding both vehicles and gasoline, spending rose just 0.1 percent.
Gasoline prices were up 43 percent from a year earlier.
The rate of spending growth slowed in electronics, furniture, and online purchases.
Spending at gas stations was up 4 percent, due to higher fuel prices, which balanced out much of the 3.5 drop in sales among car dealers and auto parts stores.
TREND FORECAST: In May, retail sales posted an annual increase of 8.1 percent. Inflation’s annual rate for the month was 8.6 percent. Therefore, when accounting for inflation, retail sales were down. And according to John William’s Shadow Stats, real inflation is at least double the “official” rate which means consumers spent a lot more for a lot less… and the numbers prove that the economy is going down as interest rates go up.
Record low interest rates and trillions in free money Washington dumped into the economy artificially drove consumer spending and U.S. economy up through the COVID War. Indeed, the unprecedented money pumping schemes sparked an economic recovery stronger than had been expected, sending the unemployment rate to near-historic lows and raising prices at their fastest clip in 40 years.
In April, the savings rate plunged to a 14-year low as consumers diverted their funds to cover inflation’s added costs, a trend we highlighted in “Americans: Spending More, Saving Less” (7 Jun 2022).
Supporting our forecast for declining economic growth, JPMorgan’s projection of 2.5-percent U.S. economic growth in this quarter, trimmed from its earlier forecast of 3.25 percent.
IHS Markit has pegged the quarter’s GDP expansion at just 0.9 percent.
“Rapidly rising prices [are] driving a shift from discretionary purchases such as furniture and electronics to essentials like food and gasoline,” the WSJ said.
TRENDPOST: The higher interest rises, the deeper the economy will fall. Unlike when much of the country was locked down and people’s saving rates dramatically rose thanks to the free money given to them by Washington, now their saving rates have been looted. And the higher inflation rises, the less products and services they will purchase.
Yes, the spending spree on both goods and services will dramatically slow down as consumers drain their savings account and divert cash toward basic essentials such as rent, mortgage payments, health insurance, food and fuel.