Retail sales unexpectedly fell 0.3% in May, the Commerce Department reported on Wednesday, the worst drop since January 2016. Sales excluding autos also sank 0.3%.
X Wall Street was expecting a mild 0.1% rise overall and a 0.2% increase outside the stalling auto sector.
The retail data, along with May inflation data, gave the Federal Reserve the most up-to-date picture of the economy as policymakers finalized their meeting. But that didn't stop the central bank from hiking interest rates Wednesday afternoon, or offering a relatively hawkish outlook.
Treasury yields, which tumbled to 2017 lows on the economic data, recovered somewhat after the Fed meeting.
Sales at nonstore retailers led by Amazon (AMZN) and building materials suppliers such as Home Depot (HD) have been the strongest categories, while sales at department stores such as Macy's (M) continue to bleed.
Advertisement
Amazon and other other nonstore sales rose a hefty 10.2% vs. a year earlier, though that was a touch slower than April's 11.4% year-over-year increase. Among the major areas of weakness, electronics store sales fell 2.8% vs. April and are now down 0.2% year to date. Sales at restaurants and bars slipped 0.1%.
The consumer price index fell 0.1% in May, while the core CPI that strips out volatile food and energy prices rose 0.1%, the Labor Department reported on Wednesday.
Economists expected the CPI to be unchanged, with core prices rising 0.2%.
Compared to a year ago, the CPI is up 1.9% and the core CPI 1.7%, both weaker than expected. Core inflation hit a two-year low.
Although the Fed's primary inflation gauge is the Commerce Department's personal consumption expenditures (PCE) price index, a few economists had speculated that a weak CPI reading could influence the outcome of the Fed meeting.
Inflation has ebbed in recent months as used car prices have fallen, pressuring new car sales at Ford (F) and General Motors (GM). A decline in wireless phone prices also has curbed inflation readings amid a restoration of unlimited data plans by Verizon (VZ).
Amazon and a resurgent Wal-Mart (WMT) also have helped pull down prices, both by price cuts and grabbing market share.
Wal-Mart, Verizon and Home Depot are members of the Dow Jones industrial average.
The Dow industrials hit a record high early, then rallied into the close to finished up 0.2%. The S&P 500 index lost 0.1% and the Nasdaq 0.4%.
Fed Hikes Rates, But Markets Don't Like Hawkish Tone
Macy's Triggers New Retail Rout On Gross Margins Warning
Amazon Price Target Raised As 'Best Positioned' Internet Stock Thrives
Here's One More Thing Amazon May Be Killing