Americans are still spending their tax refunds — for now, as retail sales jump in May

Shoppers stepped up their spending in May and surpassed expectations as temperatures warmed and gasoline prices cooled. Retail sales rose 0.9%, up from a revised 0.4% gain in April, according to new Commerce Department data released Wednesday. Sales got a boost from generous government tax refunds in both April and May, though economists say that cash cushion is starting to fade. Excluding sales at gas stations, retail sales in May rose 0.7%. Spending was broad-based. Business at clothing, accessory and furniture stores all posted increases. Online sales rose 1.5%. There were a few weak spots. Electronics and appliance stores and department stores both registered slight declines. The data released Wednesday offers only a snapshot of consumer spending and doesn’t include activities like travel and hotel stays. The lone services category – restaurants – registered a 0.1% decline. But the so-called control group—which excludes food services, autos, building materials and gas station sales and is used to calculate economic growth—rose 0.7%. That suggests solid spending, economists said. Consumers are the engine of the American economy, driving most of the nation’s economic growth. And the latest retail sales report underscores that spending has remained resilient so far this year despite rising prices. Solid increases in hiring have also buoyed spending, economists said. “The stronger-than-forecast and broad-based gains in May retail sales show that consumers continued to spend strongly despite higher gasoline prices in the month,” Nationwide Chief Economist Kathy Bostjancic writes. “The large tax refunds and overall tax reductions for households this year and the recent strengthening in employment growth helped buffer the negative drag from higher gasoline prices.” Rising gas prices pushed inflation to its highest level in three years, U.S. data showed last week, with consumer prices rising 4.2% in May, compared with last year. On a monthly basis, prices rose 0.5