Shoppers are showing signs of pulling back on spending on discretionary items like clothing and home goods as gasoline and groceries eat up more of their paychecks.
Those pressures led many retailers on Thursday to report only modest revenue increases in May, the latest sign of the economy hitting a soft patch.
Retailers that cater to wealthy shoppers and warehouse clubs like Costco that also sell gas reported the biggest gains.
Most of the spring, consumers seemed to shrug off rising prices. Now, gasoline at more than $1 per gallon more than last year and higher grocery bills are "finally taking a bite and affecting sales," said Ken Perkins, president of research firm Retail Metrics. "It definitely raises the caution flag going into the summer."
Revenue rose 5.4 percent overall at stores open at least a year among 27 retailers, according to the International Council of Shopping Centers. Excluding gasoline, the figure rose 3.7 percent.
That was within the 3 percent to 4 percent range expected, said Mike Niemira, ICSC chief economist and director of research.
"On the surface, the numbers look pretty good," Niemira said. "But it is being driven by a very narrow set of retailers."
The figures are based on revenue from stores open at least one year, a key indicator of a retailer's health because it excludes results from stores opened or closed during the year.
Niemira expects the June revenue figure to rise 3 percent to 4 percent, excluding fuel.
The May results follow disappointing economic reports on unemployment, housing and consumer confidence that investors worry indicate a softening of the economy. The Dow Jones industrial average skidded 280 points Wednesday, losing more than a quarter of the year's gains, on rising economic fears, and fell again Thursday.
Consumer spending is closely watched because it accounts for about 70 percent of U.S. economic activity and is critical for a strong economy.
Of 24 retailers, 60 percent missed expectations and 40 percent beat expectations, according to Thomson Reuters. The reports don't include Wal-Mart Stores Inc., the world's largest retailer.
Target's revenue at stores open at least a year rose 2.8 percent, below the 3.5 percent analysts expected, according to FactSet.
"Our guests continue to shop cautiously in light of higher energy costs and inflationary pressures on their household budgets," Target Corp. CEO Gregg Steinhafel said.
Julie Hart, 35, is feeling the pain. She said she won't be able to send her 11-year-old son to summer camp this year because of higher prices. The retail worker in Garland, Texas, added that her son's grandmother, who once lavished gifts on her son, can't anymore.
"Food and gas are the priority ... and there's nothing else left," she said.
Stores that cater to middle- and lower-income shoppers fared worse than more expensive stores. Luxury retailer Saks Inc. reported May results jumped 20.2 percent, far higher than analysts expected. Nordstrom Inc. also beat expectations.
Macy's was another standout. The company's revenue figure rose 7.4 percent and the company raised second-quarter guidance.
But midpriced department stores, such as Dillard's, J.C. Penney and Kohl's all missed expectations.
Weather could have hurt results. May was unseasonably cold and wet, and there were floods along the Mississippi and Ohio rivers and 350 tornadoes reported, according to weather research firm Planalytics.
Summer could be even more difficult, because the surging price of cotton is expected to start showing up in clothing prices. Prices have been creeping up already, Perkins said, but could rise anywhere between 5 percent to 20 percent this summer.
Still, most retailers are still reporting revenue increases, not declines. That's cause for some optimism, said Chris Donnelly, senior executive in Accenture's retail practice.
"We're still seeing growth despite the gas prices and unemployment, inflation and falling home prices," he said.
Warehouse clubs benefited from rising gas prices, partly because those stores use discounted gasoline to lure shoppers into buying memberships. Costco Wholesale Corp. and BJ's Wholesale posted strong results.
Still, dollars that go into gas tanks can't be spent elsewhere.
Beky Hayes, in Austin, Texas, said high gas prices have forced her to put off haircuts, taking her dog to the vet and buying a new bed.
"I'm a musician, and I have to drive my equipment to play a show," she said. "So higher gas prices have cut into my budget for other things that I need."