A sharp drop in gas prices likely dragged down U.S. retail spending in May. But economists will pay more attention to what consumers spent elsewhere to get a better sense of the broader trend in sales.
Economists forecast that retail sales fell 0.1 percent last month, according to a survey by FactSet. The report will be released at 8:30 a.m. by the Commerce Department.
The anticipated monthly decline would be the first in a year. But it is largely expected because gas prices have tumbled since peaking on April 6. On Tuesday, the average nationally price for a gallon of gas averaged $3.54, according to AAA. That's down 19 cents from a month earlier.
Joel Naroff, chief economist at Naroff Economic Advisors, said after excluding volatile gas prices, retail sales likely increased a modest 0.2 percent last month. The retail sales figures are not adjusted for price changes, so a big drop in fuel costs would translate into less spending.
The retail sales report is the government's first look at consumer spending, which drives 70 percent of economic activity. Lower gas prices could give consumers more to spend in the coming months on restaurant meals, clothes, appliances and other discretionary purchases that drive growth.
Private reports for May suggest consumers kept spending. Auto dealers reported strong sales in May. And many of the nation's major retail stores reported solid sales during the month as customers were lured in by Mother's Day promotions and new styles of clothing.
Target and Macy's reported results that beat Wall Street estimates for May.
In the January-March quarter, overall economic growth slowed to an annual rate of 1.9 percent, down from a 3 percent rate of increase in the October-December period.
The strength in the first three months of this year was led by the fastest growth in consumer spending in more than a year. But economists are worried that consumer spending may weaken if income growth does not revive.
Workers' average hourly earnings have risen just 1.7 percent in the 12 months ended in May. That's well below the pace of inflation during this period.
And job growth has slowed since the start of the year. Employers added 226,000 jobs on average during the first three months of the year; they have added an average of 73,000 jobs a month since April.
If job growth does not revive, that could act as a drag on consumer spending in coming months.