Retail sales in the US fell by 0.9% in May, totaling $715.4 billion. This drop exceeded the expected decline of 0.7%. April also saw a slight decrease, adjusted to 0.1%. However, retail sales increased by 3.3% compared to the previous year, down from 5% in April. From March to May 2025, retail sales rose by 4.5% compared to the same period last year. Retail trade sales slipped by 0.9% from April but rose by 3.0% on a yearly basis. The Import Price Index held steady in May, while the Export Price Index dropped by 0.9%.

US Dollar’s Performance

The US Dollar remained stable, with the USD Index down slightly by 0.04%, reaching 98.10. April’s retail sales reading was revised from -1.5% to -0.1%, providing more clarity on retail trends. The unexpected 0.9% drop in May’s retail sales suggests a short-term dip in consumer demand, even though annual numbers indicate moderate growth. The revised April figure, now at -0.1%, corrects the earlier impression of a severe spending slowdown. The softer monthly data, alongside the annual growth rate dropping from April’s 5% to 3.3%, points to a slowdown in overall spending. From March to May, there was still a 4.5% year-on-year increase in consumption, largely thanks to strength in March. May’s decline overshadowed April’s stability, with retail trade sales negatively affecting overall figures. The 0.9% drop in the Export Price Index suggests weakening international demand, while unchanged import prices indicate that foreign cost pressures are currently controlled. Currency markets responded with little movement. The Dollar Index barely changed, easing just 0.04%, suggesting that traders’ expectations remained stable after the release of the data. However, the revised April numbers helped clarify previous uncertainties, providing better insights into consumer resilience.

Market Reactions

For those monitoring pricing trends, the mix of reduced internal consumption, stable import costs, and decreasing export prices creates a complicated outlook. The weak response in currency markets indicates that traders may be pausing on making adjustments, waiting for clearer data. However, the drop in export prices could hint at potential deflation, especially if the trend continues in the following months. These indicators should be watched for consistency rather than one-time occurrences. Powell’s earlier remarks on needing “more good data” for inflation progress mean that two consecutive months of declining sales and flat external costs might influence expectations, but not yet forcefully. There’s a possibility that early-year consumer spending was overestimated, and these revisions could align market pricing more closely with actual activities. In the short term, movements in yield-sensitive derivative contracts may slow as traders seek clarity on rates. If retail trends remain modest with steady import prices, this could allow markets to price movements more cautiously without immediate concern for Fed responses. Volatility markets might pick up on stable pricing, but without a rise in inflation or a rebound in spending, the case for stabilization expectations strengthens incrementally. It’s essential to watch how next month’s data influences this trend or reinforces it. In any case, the data suggests quicker reaction times, likely reflected in near-term options premiums and skew differentials in rate-sensitive instruments. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now