Retail sales came in stronger than expected in May. Following a weaker revised 0.7 percent monthly gain in April, volumes rose 0.4 percent. The increase surpassed the market consensus and was large enough to pull up the unadjusted annual growth from minus 8.4 percent to minus 5.1 percent.

The overall monthly rise masks a 1.4 percent decline in food volumes. And for the 23rd month in a row, real sales in the food retail sector were down versus the year-ago month. In May, food volumes were 4.4 percent below May of last year, but 6.7 percent higher in nominal terms. While annual sector inflation fell to 14.9 percent in May from April's 17.2 percent, it remains a key factor hindering sales.

Non-food retail sales meanwhile rose 0.5 percent on the month in May but were 3.4 percent below May of last year. In the online and mail order sector, volume sales fell 3.1 percent on the month in May and were down 7.0 percent versus May of 2022.

Retail sales are expected to come in unchanged on the month in May after rising 0.8 percent in April

Retail sales measure the total receipts at stores that sell durable and nondurable goods. The data are compiled from about 27,000 retail businesses and are reported in both nominal and volume terms. Autos are excluded. A very limited breakdown of subsector performance is available in the initial report which is itself subject to sometimes sizeable revision but much greater detail is provided in the following month's release.

With consumer spending a large part of the economy, market players continually monitor spending patterns. Retail sales are a measure of consumer well-being. The pattern in consumer spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth.

Retail sales not only give you a sense of the big picture, but also the trends among different types of retailers. Perhaps auto sales are especially strong or apparel sales are showing exceptional weakness. These trends from the retail sales data can help you spot specific investment opportunities, without having to wait for a company's quarterly or annual report. However, by excluding the services sector, changes in retail sales data can differ significantly from those in total household spending.