With inflation continuing to rise every passing month, it’s taken a toll on both Americans focusing on necessities and the retail industry. In May, retail sales fell 0.3%, marking the first time since the end of 2021 that a decrease has occurred.
Amidst crippling inflation that has forced Americans to cut back on spending in order to save for food and gas, U.S. retail sales declined 0.3% in May, according to the Department of Commerce. It marks the first decline since the end of 2021, and erases the progress a 0.7% rise made in April.
Even with the decline, the mark is an increase of 8.1% from this time last year. Among the biggest fallers include motor vehicles and parts dealers (-3.5%), electronics (-1.3%), and furniture (-0.9%), all of which are areas that many simply cannot afford now.
The decline is unexpected, as experts surveyed by Bloomberg anticipated a rise of 0.1%. The motor vehicles and parts fall can also be credited to the Federal Reserve’s raising of interest rates by 0.5% in early May, which increased loans.
“At a time of war – historically high refinery profit margins being passed directly onto American families are not acceptable. Companies must take immediate actions to increase the supply of gasoline, diesel, and other refined product.”
These numbers are not adjusted for inflation, which rose to 8.6% in May, a 40-year high that has shown no signs of slowing down. It was 0.3% more than the market forecasted, and up from April’s 8.3%. Elsewhere, restaurants and clothing stores saw rises of 0.7% and 0.1%, respectively, while miscellaneous stores saw a decline of 1.1%.
Online sales fell 1%, signaling a return to more physical shopping as COVID-19 cases start to wane down. Food and beverage stores saw a 1.2% increase due to hiked prices, while gas stations enjoyed the same luxury. They saw a jump of 4%, and an eye-popping year-over-year rise of 43.2%.
Gas has become the thorn in the side of millions, with the national average reaching $5.014 per gallon, according to AAA. The West has been hit the hardest, with California seeing prices around $6.4. It’s led to President Joe Biden to call upon oil refiners to produce more gas.
“The crunch that families are facing deserves immediate action,” Biden stated in a letter to refiners. “Your companies need to work with my Administration to bring forward concrete, near-term solutions that address the crisis.” He recently targeted ExxonMobil, saying that they’ve made “more money than God” this year, while “nothing has changed.”
“It’s the difference between trying to land an airplane in a really wide and spacious open field versus trying to land an airplane on a very, very narrow piece of land with rocks and water on either side.”
The urgency of the economy is also forcing the Fed to act again, as it’s set to raise its benchmark short-term rate to 0.75%, the largest increase since 1994. It will also forecast additional rate hikes throughout the rest of 2022.
“It is essential that we bring inflation down if we are to have a sustained period of strong labor market conditions that benefit all,” Federal Reserve chairman Jerome Powell stated at a press conference following the raise Wednesday.
While raising interest rates could help to slow down demand, in turn bringing down inflation — albeit steadily — in what’s known as a “soft landing,” it also runs the risk of a recession, which the country hasn’t experienced since 2009.
The problem with a soft landing, former U.S. Treasury senior advisor Stephen Miran told CNBC, is that the zone needed to be successfully hit in order to bring down inflation without causing a recession is extremely difficult.
Powell also admitted in May that he couldn’t guarantee a soft landing, and regardless of the outcome of the maneuvers, there will be economic casualties — most likely in the form of increased unemployment, which has enjoyed months of record-lows.
“If we think about the most value-conscious customer group, we’re watching that group. How is that group behaving and what do they need from us?”
However, relief could be on the way for those struggling to manage their budgets. According to Bloomberg, major retail companies are working to maintain their clientele through discounts and markdowns, even as inflation rises.
Gap has already gone about freezing prices thanks to their “Price ON-Lock” initiative, which will focus on kids fashion as the back-to-school shopping season inches closer.
“Our customers, and parents in particular, are feeling the pressures of inflation and we want to assure them that they can outfit their children for summer and back-to-school with our everyday kids fashion essentials at a guaranteed price and value,” Old Navy senior vice president and head of merchandising Andres Dorronsoro said in a press release.
Walmart, which saw a 33% inventory increase in the first quarter of 2022, also said they would keep prices “as low as we can” in order to continue shifting inventory.
“We’re adjusting and will balance the needs of our customers for value with the need to deliver profit growth for our future,” Walmart CEO Doug McMilon assured.
Andrew Rhoades is a Contributing Reporter at The National Digest based in New York. A Saint Joseph’s University graduate, Rhoades’ reporting includes sports, U.S., and entertainment. You can reach him at firstname.lastname@example.org.