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Weak Retail Sales

Economic Observer: Up-to-date information on the latest financial news

Overview: The major economic data released over the past week fell short of forecasts. Notably, consumer spending is slowing, and inflation is easing. As a result, mortgage rates ended the week a little lower.


Since consumer spending accounts for over two-thirds of U.S. economic activity, the retail sales data is a key measure of the economy’s health. In May, retail sales rose just 0.1% from April, far below the consensus forecast, and the results for the prior month received a significant downward revision as well. Monthly declines were seen in several categories including bars/restaurants and furniture stores. Higher prices and credit card rates are causing consumers to become more cautious about their spending.


Another major inflation indicator, which measures costs for producers, also was lower than expected. In May, the core Producer Price Index (PPI) was 2.3% higher than a year ago, down from an annual rate of 2.4% last month, and well below the consensus forecast. This follows a similarly weaker-than-expected reading for the widely followed Consumer Price Index (CPI) in May. Investor expectations for a rate cut by the Federal Reserve in September increased following the weak retail sales and inflation data.


The severe shortage of homes in many regions shows few signs of letting up any time soon. In May, overall housing starts fell 6% from April, far more than expected, to the lowest level since June 2020. On an annual basis, multi-family units are now 50% lower than last year at this time, while single-family units are 2% lower than a year ago. Single-family building permits, a leading indicator of future home construction, fell for the fourth straight month. In addition, a separate survey of home builder sentiment on housing market conditions from the National Association of Home Builders (NAHB) unexpectedly declined for the first time since December.


Retail Sales (% change)

Percentage change of retail sales from September 2023 to May 2024.


Week Ahead

June 21

Existing-Home Sales Report

June 25

Consumer Confidence Index

June 26

New-Home Sales Report

June 28

Personal Income and Outlays

Personal Consumption Expenditures (PCE) Price Index


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