Nation & World

Consumer spending stays 'solid,' may affect urgency of federal reserve cutting interest rates

Pickup at stores, factories hints Fed cut isn't a slam dunk

Federal Reserve Chairman Jerome Powell (C) speaks with Chicago Fed President Charles Evans (L) and St Louis Fed President James Bullard at a conference on monetary policy at the Federal Reserve Bank of Chicago, part of a 'Fed Listens' series as the U.S. central bank rethinks its long term strategies in the face of low inflation and low real rates, in Chicago, Illinois, U.S., June 4, 2019. REUTERS/Ann Saphir
Federal Reserve Chairman Jerome Powell (C) speaks with Chicago Fed President Charles Evans (L) and St Louis Fed President James Bullard at a conference on monetary policy at the Federal Reserve Bank of Chicago, part of a 'Fed Listens' series as the U.S. central bank rethinks its long term strategies in the face of low inflation and low real rates, in Chicago, Illinois, U.S., June 4, 2019. REUTERS/Ann Saphir

U.S. stores and factories reported an uptick in activity last month, suggesting the economy is humming along without an urgent need for the Federal Reserve to cut interest rates.

Retailers posted a broad-based gain, with the value of overall sales rising 0.5 percent from April, and figures for the previous two months were revised higher. Manufacturing output also increased for the first time this year.

Treasuries fell and the dollar rose on the data, which signaled that spending by American consumers — the economy’s main driver — is holding up amid low employment and rising wages, while manufacturers aren’t too demoralized yet by President Donald Trump’s trade war.

Less upbeat numbers for payrolls and inflation in the past week led many investors to increase bets that the Fed will lower borrowing costs in the next couple of months.

“Today’s report was a bit of relief for the Fed. It takes out a sense of urgency for them to act,” said Michelle Meyer, head of U.S. economics at Bank of America Corp.

“The trend in the last three months for consumer spending was quite solid following the first quarter where it was soft.”

As well as the May gain, retail sales in April were revised to a 0.3 percent increase, according to Commerce Department figures released on Friday.

Out of 13 major categories, 11 saw increases.

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Sales in the “control group” subset, which some analysts view as a more reliable gauge of underlying consumer demand, climbed 0.5 percent, topping projections.

The measure excludes more volatile items such as food services and fuel stations.

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