Consumer spending slowed in May, as American consumers felt the sting of inflation across the marketplace.
Overall consumer spending rose 0.2% in May, according to a Thursday report from the Bureau of Economic Analysis (BEA). This marks a slowdown from the 0.9% growth in April. The Bureau’s measure of inflation remained unchanged from the last month, with prices in May up 6.3% compared to the same period last year.
Retail sales in May also slowed from the prior month, though were still well above last year’s levels. Retail and food service sales in May 2022 totaled $672.9 billion, marking a seasonally adjusted 0.3% decrease from the previous month and a 8.1% leap from May 2021, the U.S. Census Bureau reported.
At the same time, inflation hit a more than 40-year high in May, with consumer prices up 8.6% compared to the year ago period, according to the Bureau of Labor Statistics’ monthly report. This number was up from 8.3% growth in April and from the 8.5% growth in March.
While the economy’s growth appears to be slowing, the National Retail Federation said that a recession is unlikely to occur for the remainder of 2022.
“Regardless of the prospect of a downturn or whether it will meet the threshold of a recession, the consumer outlook over the next few months remains favorable,” said NRF chief economist Jack Kleinhenz. “The economy is moving away from extremely strong growth toward moderate growth, but increased income from employment gains, rising wages and more hours worked is expected to support household spending. Policy issues will likely be the deciding factor shaping the economic outlook this year and next.”
Meanwhile, consumers in May expressed more concern about mounting inflation pressures, according to the Federal Reserve Bank of New York’s Center for Microeconomic Data. Median inflation expectations for the year ahead increased from 6.3% to 6.6% in May, up 0.3% from April, the New York Fed said. This marked the highest recorded rate of survey since June 2013, tied with March.
In a June 27 letter to President Biden, American Apparel & Footwear Association president and CEO Steve Lamar urged the president to eliminate the burdensome Section 301 tariffs to help mitigate inflation.
“Eliminating these tariffs now, given the highly competitive dynamics of the U.S. market, would reverse these costs dynamics, reducing a key inflationary pressure on everyday items like textiles, apparel, footwear, and travel goods,” Lamar wrote.