Retail sales in May climbed 0.9% to $764bn, topping Census Bureau estimates and rising 6.9% year‑on‑year. The lift came despite gasoline prices spiking after the Iran‑Israel conflict, with pump sales up 3.4% and core retail – excluding fuel and autos – gaining 0.7%. Tax refunds averaging over $3,500 per return kept consumer spending buoyant.

Analysts linked the surge to the 2025 budget law championed by Donald Trump, which delivered sizable refunds that offset higher energy costs. Jefferies' Thomas Simons noted little sign of fatigue from high gas prices, while ING’s James Knightley said households are financing purchases through reduced savings and more borrowing. Consumer sentiment edged higher, though still below pre‑war levels.

The data arrive as Kevin Warsh prepares to chair his first Federal Reserve policy meeting, with markets watching for clues on rate direction. Inflation peaked at a three‑year high of 4.2% in May but gas prices have slipped from above $4.50 to around $4 per gallon. The rebound in retail spending underscores short‑term resilience, but economists warn that once the tax rebate wave recedes, demand could soften.