Dear Reader,
Retail sales in May unexpectedly fell by 0.3% from a month ago, new data from the US Census Bureau revealed.
This was much weaker than the 0.1% gain economists expected. It was also the first decline since December.Motor vehicle and parts sales declined.
Furniture and home furnishings sales declined.
Electronics and appliance sales declined.
Health and personal care store sales declined.
Online retail sales declined.
The pattern is clear.
However, gasoline station sales jumped 4.0%, and grocery store sales increased by 1.2%. But, it's worth noting these categories have also experienced considerable price inflation.
The retail sales report is in line with the mounting evidence that the economic narrative is finally shifting to one where red-hot demand cools and becomes more in line with supply, which should cool inflation.
A slowdown in demand is actually what everyone is looking for right now — the Federal Reserve, which is expected to hike interest rates again eventually.
The top priority among policymakers right now is to cool inflation, and for now, the best path to lower inflation seems to be a slowdown in demand.
Indeed, this is why we've been saying that good news in the economy has been bad news for inflation — and vice versa.
For now.
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