Retail sales up a strong 0.9% in May, underscoring the resilience of the US consumer

NEW YORK (AP) — Shoppers stepped up their spending in May and surpassed expectations as temperatures warmed and gasoline prices leveled off.

Retail sales rose 0.9%, up from a revised 0.4% gain in April, according to Commerce Department data released Wednesday. Sales got a boost from generous government tax refunds in both April and May, though economists say that cash cushion is starting to fade.

Excluding sales at gas stations, retail sales in May rose 0.7%.

The figures aren't inflation-adjusted so higher prices likely helped boost sales. But economists point to healthy spending with increases that were broad-based. Business at clothing, accessory and furniture stores all posted sales gains. Online sales rose 1.5%.

There were a few weak spots. Electronics and appliance stores and department stores both registered slight sales declines.

The data offers only a snapshot of consumer spending and doesn’t include activities like travel and hotel stays. The lone services category – restaurants – registered a 0.1% decline. That might have reflected how high gas prices forced shoppers to cut back on driving to eating establishments, according to Sam Tombs, chief U.S. economist at Pantheon Macro.

But the so-called control group—which excludes food services, autos, building materials and gas station sales and is used to calculate economic growth—rose 0.7%. That suggests solid spending, economists said.

Consumers are the engine of the American economy, driving most of the nation’s economic growth. And the latest retail sales report underscores that spending has remained resilient so far this year despite rising prices. Solid increases in hiring have also buoyed spending, economists said.

"The stronger-than-forecast and broad-based gains in May retail sales show that consumers continued to spend strongly despite higher gasoline prices in the month,” Nationwide Chief Economist Kathy Bostjancic writes. “The large tax refunds and overall tax reductions for households this year and the recent strengthening in employment growth helped buffer the negative drag from higher gasoline prices.”

Tombs was more cautious about the spending outlook.

“Consumption regained some momentum over the spring, but the sugar rush from bigger-than-usual tax refunds will wear off soon,” Tombs wrote in a report.

Rising gas prices pushed inflation to its highest level in three years, U.S. data showed last week, with consumer prices rising 4.2% in May, compared with last year. On a monthly basis, prices rose 0.5% last month, after big gains of 0.6% in April and 0.9% in March.

There is a tentative deal to end the Iran war and reopen the Strait of Hormuz, but even after oil starts flowing again from the Middle East it could take awhile for the supply crunch to ease.

Gas prices fell about a penny overnight to $4.02, down 11% from a month ago, according to motor club AAA. The national average for a gallon of gasoline has not been below $4 since March, according to AAA.

“While the deal is encouraging, our industry is still holding its breath,” said Steve Lamar, the CEO of trade group American Apparel & Footwear Association. ”Our question now is, will this agreement be strong enough for our global industry to begin recovering?”

Lamar noted that unplanned costs continue to squeeze profit margins, with companies facing higher expenses for ocean freight, air cargo and packaging. He said that even under the best-case scenario, it will take time to stabilize.

The spike in gas prices this year due to the Iran war may alter some behavior, peace deal or not.

Even as gas prices continue to retreat, analysts say some shoppers will stick to habits they picked up as prices soared, like filling up the car at big box stores where they can get discounts.

Visits to gas stations operated by big box chains like BJ’s, Costco and Sam’s Club, which offer discounts to members, began to accelerate in early March, aligning with a sharp rise in fuel prices, said R.J. Hottovy, the head of analytical research at Placer.ai, which tracks people’s movements based on cellphone usage.

FILE - A customer prepares to pump diesel fuel at this Madison, Miss., Sam's Club, Tuesday, May 24, 2022. (AP Photo/Rogelio V. Solis, File)

FILE - A employee works at a cash register in a grocery store in Schaumburg, Ill., Thursday, May 14, 2026. (AP Photo/Nam Y. Huh, File)

LONDON (AP) — A British yacht owner who was warned away from a Russian warship by gunfire criticized the U.K. government Wednesday as Prime Minister Keir Starmer tried to downplay the incident by saying there wasn't anything sinister about it.

Alan Kelvey, 70, and his wife, Jane, 68, said the shots were fired Tuesday morning when they crossed paths with the warship in the English Channel.

The U.K. Defense Ministry described the encounter as “an isolated incident," and Starmer said the Russian ship was seeking to avoid a collision. British media reported that the crew of the frigate Admiral Grigorovich fired warning shots into the air after failing to contact the yacht by other means in foggy conditions.

Alan Kelvey rejected the tone of the accounts of the incident, saying officials were trying to minimize an “inflammatory” encounter. “They’re trying to close the story down now, saying that it was foggy and they were shooting flares up,” he told Britain’s Daily Telegraph newspaper. “It’s rubbish.”

No one was injured during the encounter and the couple completed their journey to Cherbourg on the northern coast of France. But the incident underscored heightened tensions between the U.K. and Russia as Moscow steps up military activity in the air and seas around Britain.

The incident occurred two days after Britain seized a tanker from Russia’s so-called shadow fleet, which Western powers say is used to skirt sanctions on Russian oil exports imposed after the invasion of Ukraine. Britain has also accused Russia of mounting a campaign of sabotage and misinformation designed to destabilize European nations that support Ukraine.

Speaking at the G7 summit in France, Starmer said the encounter was “deeply concerning,” even though authorities have concluded the shots weren’t “anything more sinister” than an effort to avoid a collision.

“That doesn’t take away from the fact that clearly Russia is aggressive across Europe,” Starmer said.

The incident occurred about 20 nautical miles (23 miles, 37 kilometers) south of the Isle of Wight, outside U.K. territorial waters, as the couple were heading to France on the 40-foot (12-meter) sailboat Bright Future.

Russia’s Defense Ministry said the Admiral Grigorovich sounded its air horn and then fired flares after the yacht was seen sailing on a “dangerous course in close proximity with the warship.”

“After the distance had closed to 150 meters (500 feet), the frigate’s commander decided to fire warning shots across the vessel’s bow using small arms,” the ministry said. The yacht then changed course and sailed away, it said.

Alan Kelvey told the Telegraph that he and his wife were sailing toward France when they came across the warship sitting in the middle of the channel with its Automatic Identification System shut down. He said he only realized it was a Russian ship when they got close enough to see the Cyrillic lettering on its hull.

Kelvey indicated he thought it was the motorized ship's responsibility to change course to get out of the way of his sailboat.

“I was just standing on my course and, as I’m a sailing boat on a course under sail, I’ve got right of way," he said.

FILE - A Russian warship is docked in Port Sudan, Sudan, on Feb. 28, 2021. (AP Photo, File)