US Consumers May Turn Cautious On Spending Amid Energy Cost Pressure
U.S. retail sales increased further in April, but some of the rise in receipts was likely due to higher inflation as the war with Iran boosted prices of energy products and other commodities.
Sales grew stronger by +4.9%yoy in Apr-26 (Mar-26: +4.2%yoy), the highest reading since Aug-25. However, on a monthly basis, retail trade moderated by +0.5%mom (Mar-26: +1.6%mom), in line with consensus. Growth was mainly attributable to the large rise in gasoline station receipts (+2.8%mom) as gasoline prices remains elevated amid tensions in the Middle East.
While gasoline prices have surged, spending in other sectors remains resilient, bolstered by larger tax refunds this year. Monthly gains were recorded for sporting goods, hobby, musical instrument, & bookstores (+1.4%mom); electronics stores (+1.4%mom); non-store retailers (+1.1%mom); food and beverages (+0.8%mom). Meanwhile, the control group, which excludes volatile categories like autos, food services, building materials, and gasoline to better reflect broader consumer trends, rose at a softer pace by +0.5%mom (Mar-26: +0.8%mom), slightly exceeding consensus of +0.4%mom.
In a separate data release, Initial jobless claims in the US rose marginally by +12K to 211K for the second week of May-26 (previous week: 199K), higher than expectations of 205K and remaining below historical average. Meanwhile, continuing claims increased by +24K to 1.78m (previous week: 1.77m).
The surge in receipts was likely driven by heightened inflation, as the conflict with Iran spiked prices for energy and other commodities. Nonetheless, steady consumer spending, elevated inflation data, and a robust labour market, support the Fed’s current pause, reinforcing a ‘higher-for-longer’ policy stance.
While larger-than-usual tax refunds offer a temporary cushion for household budgets, forward-looking indicators have turned sharply pessimistic. The preliminary University of Michigan Consumer Sentiment Index fell to a record low of 48.2 in May-26 (Apr-26: 49.8). As persistent pressure from high gasoline prices and tariffs stifles personal finances, MBSB in its research note said concerns are mounting that consumers would be more cautious in their spending through the remainder of the year.
