U.S. Retail Sales Fell 0.3% in May -- Update

Sales at U.S. retailers declined broadly in May as Americans reduced car purchases and tightened spending overall.

Retail sales -- reflecting consumer spending at stores, restaurants and websites -- fell 0.3% in May from a month earlier, the Commerce Department said Wednesday. That marked the steepest drop since January 2016.

A big factor was cheaper gasoline, which translated into less spending at service stations. But consumers also cut spending at big-box stores, electronics retailers and restaurants. Car sales, after hitting a record in 2016, have fallen nearly 2% over the past three months.

Retail sales are a big component of consumer spending, which in turn accounts for roughly two-thirds of U.S. economic output. Despite strong job growth, a booming stock market and surveys showing high household confidence, Americans aren't shelling out at the rate that many economists expected this year. The subdued spending is helping to keep the economy at the sluggish 2%-growth that has marked the nearly eight-year economic expansion.

Economists said May's decline was likely a blip and that they expect consumers to step up spending in coming months. Retail sales have climbed 3.9% this year compared to the first five months of 2016.

"The fundamentals for consumers remain solid," Gus Faucher, PNC's chief economist, said in a note to clients. "More jobs, rising wages, low inflation, rising home sales, and low interest rates will continue to push consumer spending forward in 2017."

Still, not all retailers saw a decline last month. Nonstore retailers -- a group led by websites such as Amazon.com -- posted higher sales. Spending at those outlets has grown 11% over the past three months compared to the same period a year earlier. That, in part, reflects a major shift in consumer habits from brick and mortar stores to the internet.

Spending also increased last month at clothing retailers and furniture stores.

The Commerce Department's retail sales report can be found here.

Write to Josh Mitchell at joshua.mitchell@wsj.com

(END) Dow Jones Newswires

June 14, 2017 11:07 ET (15:07 GMT)