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U.S. retail sales unexpectedly drop in May as inflation surges

Yahoo Finance Live anchors discuss May retail sales data.

Video Transcript

BRAD SMITH: We're getting a better idea of how inflation is impacting the retail space in this morning's retail sales report, and particularly looking at the headline figure that came out, it was actually a decrease of 0.3% from the prior month but then 8.1% above May 2021 for the most recent data that's come through. You're taking a look at the actuals versus what the estimate was here for May retail sales, which was a move higher of 0.1%.

BRIAN SOZZI: This whole report screams a consumer under increasing pressure. I saw-- I see the retail sales numbers weakness in home furnishings, weakness in electronic categories, those big-ticket purchases, very much dovetails to what we heard from Target. Also dovetails with some new data out of Citi that I got that tracks credit card data over at Citi. You could see slowing sales really across the board versus trends in May.

And look, I spent the day yesterday at Abercrombie and Fitch's investor day, and some of the top questions from analysts to their executive team was about recession and inflation. So look, everything that I heard yesterday and continue to see in the data certainly played out in this report. And again, seeing a lot of weak-- auto dealers weak, electronics weak, non-store retailers weak. And again, I think that's in large part because of the stresses on consumer budgets.

JULIE HYMAN: Yeah. I mean, that really stood out to me, the auto dealers. That was the biggest move to the downside was the auto dealers' drop of 4%. If you put in parts and auto dealers, you get a drop of 3.5%.

And you wonder how much of that is availability, right? How much of that is price, with consumers saying I'm not going to pay this, I'm going to wait. It's difficult to say just from this number, we'll have to get more data points to find that out but electronics to your point, definitely non-store retailers, which effectively is mostly Amazon, right? Because when we're talking about pure-play online retailers, traditionally Amazon has been the bulk of that. So that could be an Amazon indicator there when you look at that non-store retail number down by 1.0%.

BRAD SMITH: I think it also begs this larger question kind of forward-looking from here, you were mentioning some of the credit card spending data, and we got that Mastercard SpendingPulse data yesterday that's looking as far out as the back-to-school season. And so even if the consumer is weathering this in the month of May, and even some of that perhaps dovetailing into June, where is it in this data that some of the card operators themselves are also seeing strength to lead them to forecast 7.5% growth year over year?

BRIAN SOZZI: I don't understand what those numbers came from.

BRAD SMITH: Right.

BRIAN SOZZI: That is completely detached from the realities of this retail sales report--

BRAD SMITH: Exactly.

BRIAN SOZZI: --the data out of Citi and what executives of retailers are telling you. And of course, the likes of Target, when you saw this retail sales report below expectations, everything that Target said 2 and 1/2 weeks ago played out in this retail report today.

JULIE HYMAN: Yeah. We had a little bit of a preview in those Target numbers.