While the U.S. central bank is expected to raise interest rates by 25 basis points on Wednesday, the second hike this year, the weakness in inflation and retail sales, if sustained, could put further monetary tightening in jeopardy.

The dollar fell against a basket of currencies on the data, while prices for U.S. Treasuries rose. U.S. stock index futures pared gains.

The year-on-year gain in the CPI in May was still larger than the 1.6 percent average annual increase over the past 10 years. Economists polled by Reuters had forecast the CPI unchanged last month and advancing 2.0 percent from a year ago.

The so-called core CPI, which strips out food and energy costs, rose 0.1 percent in May after a similar gain in April. The core CPI increased 1.7 percent year-on-year, the smallest rise since May
2015, after advancing 1.9 percent in April.

Last month, rental costs increased 0.3 percent, matching April’s gain. Owners’ equivalent rent of primary residence advanced 0.2 percent after a similar increase in April.

Gasoline prices tumbled 6.4 percent, the largest drop since February 2016, after jumping 1.2 percent in April. Food prices rose for a fifth straight month.

In the retail sales report, auto sales fell 0.2 percent after rising 0.5 percent in April. Receipts at service stations dropped 2.4 percent, the largest decline since February 2016. Sales at building material stores were unchanged, while receipts at clothing stores rose 0.3 percent.

Department store sales tumbled 1.0 percent, the largest drop since July 2016. Department store sales are being undercut by online retailers, led by Amazon.com. That has led some retailers, including Macy’s, Sears, and Abercrombie & Fitch to announce shop closures.

Sales at online retailers increased 0.8 percent last month after rising 0.9 percent in April. Sales at electronics and appliance stores plunged 2.8 percent, the largest drop since March 2010. Receipts at restaurants and bars dipped 0.1 percent, while sales at sporting goods and hobby
stores fell 0.6 percent.

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