(Bloomberg) -- US retail sales barely rose in May and prior months were revised lower, pointing to greater financial strain among consumers.

The value of retail purchases, unadjusted for inflation, increased 0.1% after an downwardly revised 0.2% drop in the prior month, Commerce Department data showed Tuesday. Excluding gasoline, sales rose 0.3%.

Of the 13 categories tracked by the Commerce Department, five showed declines as gasoline prices were cheaper in the month and furniture outlets offered discounts for Memorial Day.

The figures underscore a notable downshift in consumer spending after stronger readings earlier in the year. Economists expect a moderate pace of spending going forward as Americans exercise greater prudence given persistent inflation, a gradually cooling job market and emerging signs of financial stress.

“With services consumption growth slowing in recent months and consumer confidence plummeting again, maybe households aren’t quite as impervious to higher interest rates as we were beginning to believe,” Paul Ashworth, chief North America economist at Capital Economics, said in a note.

Data out last week showed US consumer and producer prices were both softer than expected in May, which should help bolster the Federal Reserve’s confidence that they can lower interest rates soon. In keeping rates steady last week, Chair Jerome Powell said consumer spending is still growing solidly and that the household sector is in “pretty good shape.”

Treasury yields declined as the report signaled some softening in the economy.

The retail report showed so-called control-group sales — which are used to calculate gross domestic product — climbed 0.4% in May. It fell 0.5% in the prior month, which was the most in about a year. The measure excludes food services, auto dealers, building materials stores and gasoline stations.

As such, Morgan Stanley now sees a slower rate of GDP growth in the second quarter, and Oxford Economics said the risks to its growth forecast “continue to lie to the downside.”

Goods vs. Services

Retail figures largely reflect purchases of goods, which comprise a relatively narrow share of overall consumer outlays. Data due later this month will provide more details on inflation-adjusted spending on goods and services in May.

“To be sure, the bulk of the action in terms of overall consumer spending occurs in the services component, not in retail sales, but these results are certainly in line with my view that the consumer is on the cusp of a significant slowdown,” Stephen Stanley, chief US economist at Santander US Capital Markets LLC, said in a note.

Spending at restaurants and bars, the only service-sector category of Tuesday’s report, declined 0.4%, the most since January.

“Considering spending on services had been a major engine of consumption growth, such a decline during the month that included the Memorial Day Holiday suggests consumers are feeling the effect of tightened budgets,” Bloomberg Economics’ Estelle Ou and Eliza Winger said in a note. 

A report on consumer borrowing from earlier this month showed a pullback in credit-card balances for the the first time in three years as households grappled with costlier debt, and delinquencies have continued to rise. That’s taking a toll on sentiment as well.

Separate data Tuesday showed that industrial production increased in May, helped by a pickup in factory output in a positive sign for a manufacturing sector that has been struggling for momentum. The figures stand in contrast to other measures showing manufacturing has had difficulty building momentum amid elevated input prices, inconsistent consumer demand and high borrowing costs. 

“This is a favorable development for the industrial sector, but it’s tough to see it as the beginning of sustained strength, as the sector is strapped with headwinds that will limit the pace of recovery,” Shannon Seery Grein and Tim Quinlan, economists at Wells Fargo, said in a note.

--With assistance from Christopher Condon, Chris Middleton and Mark Niquette.

(Adds GDP impact in ninth paragraph)

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