The S&P 500 (SPX) is set to open the Tuesday trading session in the red following weaker-than-expected retail sales data. During May, retail sales fell by 0.9% month-over-month (MoM), lower than the expectation for a 0.6% drop as consumers pulled back on purchases amid tariffs. Excluding autos, retail sales fell by 0.3%, also below the expectation for a 0.1% increase.
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The data could be troubling given that the full effects of tariffs have not yet materialized. “Past experience suggests the biggest price rises will come in July, though the full impact of the tariffs likely will emerge across the whole of the remainder of the year,” said Pantheon Macroeconomics Chief U.S. Economist Samuel Tombs.
Core Retail Sales Better-than-Expected
At the same time, core retail sales, which excludes items such as automobiles, gas, and building materials, rose by 0.4% MoM, ahead of the estimate for a 0.3% rise. Core retail sales remove volatile inputs from the equation and more closely aligns with consumer spending within the gross domestic product (GDP) calculation.
Consumer spending accounts for nearly 70% of U.S. GDP and is its largest component. A sustained weakness in spending would have negative effects for the entire economy.
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