US retail sales beat expectations in May

WASHINGTON, June 17 (Reuters): US retail sales increased more than expected in May, but a slowdown is likely as the cushion from larger tax refunds against higher prices diminishes.

Retail sales jumped 0.9 per cent last month after a downwardly revised 0.4 per cent gain in April, the Commerce Department's Census Bureau said on Wednesday. Economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, rising 0.5 per cent after a previously reported 0.5 per cent increase in April.

Some of the rise in sales last month reflected higher gasoline prices, which lifted receipts at service stations.

Gasoline prices surged to four-year highs amid the US-Israeli war with Iran. They have since retreated, with the national retail average slipping below $4 a gallon this week for the first time since April.

The US and Iran on Sunday said they had agreed terms to end the war and reopen the Strait of Hormuz. Tax refunds have combined with a stock market rally to underpin spending, which also came at the expense of savings. The saving rate dropped to a four-year low in April.

The retail sales data likely has no impact on monetary policy, with the Federal Reserve later on Wednesday expected to keep the US central bank's benchmark overnight interest rate in the 3.50 per cent to 3.75 per cent range.