United States retail sales slide 0.3 per cent, biggest drop in 16 months

Shops in Chandni Chowk

U.S. consumer prices fell 0.1% for May compared with consensus forecasts of prices being unchanged on the month while the year-on-year inflation rate declined to 1.9% from 2.2% previously and compared with an expected rate of 2.0%.

The Fed's preferred inflation gauge, the price index for personal-consumption expenditures, poked above the central bank's 2% target in February for the first time in almost five years but settled down to 1.7% in April, the most recent month for which data is available. It forecast that prices will rise just 1.6 percent this year, down from a March forecast of 1.9 percent.

Excluding the volatile food and energy categories, the so-called core CPI went up 0.1 percent in May on a seasonally adjusted basis, and was up 1.7 percent over the year, also lower than the 1.9 percent growth in April. Owners' equivalent rent of primary residence advanced 0.2 per cent after a similar increase in April.

US retail sales recorded their biggest drop in more than a year in May amid declining purchases of motor vehicles and discretionary spending, which could temper expectations for a sharp acceleration in economic growth in the second quarter.

Most retail names are down roughly 1 percent on the weaker-than-expected retail sales.

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The monthly core CPI was restrained by decreases in the prices of apparel, airline fares, communication and medical care services. The CPI rose 0.2 per cent in April.

The Federal Reserve was expected to boost a key interest rate later Wednesday.

"It won't stop the Fed from hiking interest rates later today, but it increases the downside risks to our forecast that there will be a further two rate hikes in the second half of this year", said Paul Ashworth, chief USA economist at Capital Economics in Toronto.

The Fed on Wednesday increased borrowing costs for the second time this year, while acknowledging the recent moderation in inflation pressures.

The 12-month overall price measure fell below the Fed's two per cent target to 1.9 per cent last month, continuing a steady decline since February, while the core, which has been falling since January, slipped another two-tenths to 1.7 per cent.

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According to the CSO data, manufacturing sector, which constitutes 77.63 per cent to the IIP, grew at 2.6 per cent in April compared to 5.5 per cent in same month past year.

American consumers forked out a total of US$473.8 billion (RM2 trillion) for the month, 3.8 per cent above May of past year.

Department store sales tumbled 1.0 percent, the largest drop since July 2016.

For now, Fed officials don't appear overly concerned with the recent downward path, attributing it at least in part to one-time drops in prices for things like wireless telephone services and prescription drugs. Sales at building material stores were unchanged, while receipts at clothing stores rose 0.3 per cent.

Sales at online retailers increased 0.8 per cent last month after rising 0.9 per cent in April.

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Receipts at restaurants and bars dipped 0.1 percent, while sales at sporting goods and hobby stores fell 0.6 percent.

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