Retail sales in the United States are rising, yet weekly unemployment claims remain elevated.

Retail sales in the United States surprisingly increased in May as consumers purchased more cars and a variety of other commodities, which should help to maintain the economy this quarter, however, mounting layoffs could limit consumer spending later in the year.

The Commerce Department said earlier that retail sales grew 0.3% in May after increasing 0.4% in April. Reuters polled economists, who predicted a 0.1% drop in sales.

Retail sales consist primarily of products and are not inflation-adjusted. The sole service category in the retail sales report is food and drinking establishments.

Despite inflation and increased interest rates making consumers choosier and price-sensitive, spending remains resilient due to solid pay rises stemming from a tight labour market. Some households still have funds from the COVID-19 epidemic.

Car dealership sales grew 1.4% in May, following a 0.4% increase in April. Online retail sales increased by 0.3%. Food and beverage sales, the only service sector included in the retail sales report, are up 0.4%. Economists consider dining out to be an important predictor of household finances.

Sales at construction supplies and garden equipment supply stores increased by 2.2%, most likely due to house improvements.

In early trading, US stocks were largely up. The US dollar currency fell versus a basket of currencies.

Moreover…

Retail sales increased 0.2% last month excluding vehicles, petrol, building materials and food services. The statistics for April have been adjusted significantly lower, showing that these so-called core retail sales rose 0.6% rather than the previously reported 0.7%.

Core retail sales tend to be closely related to the consumer expenditure component of GDP.

Consumer spending, which accounts for more than 60% of US economic activity, increased at its strongest rate in over two years in the first quarter, countering the drag on GDP growth from a severe inventory slowdown. Last quarter, the economy expanded at an annualised pace of 1.3%. The Atlanta Fed forecasts a 2.2% growth in GDP in the second quarter.

The labour market, while essentially stable, is eroding at the edges. Separately, the Labour Department said on Thursday that initial claims for state unemployment benefits were constant at a seasonally adjusted 262,000 for the week ending June 10.

Reuters polled economists had predicted 249,000 claims for the most recent week. Some of the increase in claims, which maintained them near levels last seen in October 2021, was due to recent Minnesota policy changes that made non-instructional educational employees eligible for state unemployment benefits over the summer vacation.

(Sources: investing.com, reuters.com)