Americans cut spending at petrol stations, department stores and electronics shops in May as retail sales registered their biggest drop in 16 months, a cautionary sign for the economy.
The Commerce Department says retail sales dropped 0.3 per cent last month, the first decline since February and the sharpest since a 1 per cent decrease in January 2016.
Economists had expected sales to increase slightly last month after rising 0.4 per cent in April.
Consumer prices also declined in May, reflecting a big drop in energy prices and smaller declines in a number of other areas.
It was the second monthly fall in the past three months and underscored that inflation remains a no-show for the slow-growing economy.
The Labor Department said consumer prices edged down 0.1 per cent last month following a small 0.2 per cent increase in April.
Prices had fallen 0.3 per cent in March. In addition to a drop in energy costs last month, the price of clothing, airline fares and medical care also declined.
Core inflation, which excludes energy and food, rose a slight 0.1 per cent in May.
The Federal Reserve was expected to boost a key interest rate on Wednesday with officials viewing the recent slowdown in inflation as temporary.
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