May Retail Sales - Broad Advance Despite Pricy Gasoline

US retail sales rose more than expected in May highlighting continued consumer strength despite gasoline prices at their highest level in almost four years.  In nominal terms retail spending was up 6.9% year-over-year and 0.9% month-over-month.  After adjusting for inflation, spending rose 2.7% year-over-year and 0.4% month-over-month.  Data suggests K-shaped dynamics for the economy with wealthier Americans spending at faster rates while lower-income households face tighter budgets.  Fortunately, energy prices have recently retreated as an end to the conflict in Iran appears to be within reach.

• Real (inflation adjusted) retail sales rose 2.7% year-over-year.  In May, retail sales grew 6.9% nominally netting real growth of 2.7% after adjusting for 4.2% inflation.  Higher spending at gasoline stations (+26.5%) was a key driver with additional strength from online and brick-and-mortar retailers (+12.2% and +9.1%).  Eight of thirteen categories advanced in real terms.
• Real (inflation adjusted) retail sales rose 0.4% month-over-month.  In May, nominal retail sales levels increased 0.9% compared to April netting real growth of 0.4% after adjusting for 0.5% inflation.  Nominal growth was again driven by elevated spending at gasoline stations (+3.4%) with additional strength from online and brick-and-mortar retailers (+1.5% and +2.3%).  Six of thirteen categories advanced in real terms.