By Sarah Chaney Cambon

Retail sales dropped 1.3% in May as prices businesses charge their customers rose rapidly, a sign supply-chain disruptions are holding back economic growth and triggering higher inflation.

Shoppers pulled back on purchases of autos, furniture, electronics, building materials and other items last month while boosting spending at restaurants, the Commerce Department reported on Tuesday, as more people got vaccinated against Covid-19 and business restrictions were further eased.

Consumers are venturing out as the pandemic fades, spending more at services businesses that were either shut down or operating with restrictions throughout the pandemic. Economists expect consumer spending to continue powering the economic recovery this year.

Spending, in part driven by government stimulus, has helped propel the broader U.S. economy, which grew at a 6.4% annual rate in the first quarter. Economists project that by the end of this year gross domestic product will reach the path it was projected to follow had the pandemic never happened--and then exceed it, at least temporarily.

Vehicles, however, are in short supply as a global computer-chip shortage has left car dealers with a dearth of inventory. As a result, auto sales likely fell last month. "If you don't have products, you've got nothing to sell and that means lower revenues," said Beth Ann Bovino, chief U.S. economist at S&P Global Ratings.

Write to Sarah Chaney Cambon at sarah.chaney@wsj.com

(END) Dow Jones Newswires

June 15, 2021 09:08 ET (13:08 GMT)