Retail sales measure the total receipts at stores that sell durable and nondurable goods. Consumer spending accounts for two-thirds of GDP and is therefore a key element in economic growth. Why Investors Care
| Released on 6/12/08 For May 2008 | |||||||||||||||||||||||||
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Highlights
Consumers are lot more willing to spend than consumer attitude surveys suggest as retail sales jumped in May - and it was not all higher gasoline prices. Overall retail sales surged 1.0 percent in March, following a 0.4 percent gain in April. The headline number came in well above than the consensus forecast for a 0.5 percent boost. Also March and April numbers were revised up significantly. Excluding motor vehicles, retail sales continued strong with a 1.2 percent surge in April, after gaining 1.0 percent the month before. The market forecast for ex-auto sales was for a 0.7 percent increase. When excluding both motor vehicles and gasoline, sales posted a 1.0 percent increase, after rising 1.1 percent in April.
Today's retail sales report shows the economy a lot stronger than expected. The May distribution of income tax rebates may have had more effect than anticipated. While many will agree that the consumer likely cannot continue at this pace, it is more certain after this morning that the Fed will be focusing on the timing of interest rate increases.
For overall retail sales in May, strength was in some surprising components. A 2.6 percent price-induced spike in gasoline station sales was in line with general expectations but a 2.4 percent boost in building materials & garden equipment sales and a 1.2 percent gain in general merchandise were not. Other increases were widespread as the only major component to decline was miscellaneous store retailers.
Overall retail sales on a year-on-year basis in May were up 2.5 percent while excluding motor vehicles, the year-on-year gain stood at up 4.9 percent. Excluding both motor vehicle and gasoline sales, the year-on-year rate came in at up 3.7 percent.
This morning's economic news was mixed but mostly on the side of signaling increased inflation pressures as import prices spiked and retail sales came in strong. Initial jobless claims rose more than expected, however. Net, bonds yields are likely to rise while equities are likely to gain on the view that the economy is doing better than expected but fears of pending Fed inflation fighting rate hikes could offset.
Retail sales in April were strong across the board with the key exceptions of autos and gasoline. Overall retail sales fell back 0.2 percent in March, following a 0.2 percent rebound in March. But excluding motor vehicles, retail sales jumped 0.5 percent in March after rising 0.4 percent the month before. When excluding both motor vehicles and gasoline, sales actually surged 0.6 percent, after increasing 0.2 percent in March. More recently, unit new auto sales dropped significantly in May - slipping to a 14.30 million unit annual pace from 14.46 million units in April, indicating weakness in the auto dealership component of retail sales. Chain store sales have shown improvement recently - at least on a year-ago basis. Year-ago gains do not always translate into a boost for the latest monthly number due to expectations built into monthly seasonal factors. And consumers may be becoming more value conscious with one of the recent upside surprises for sales being Wal-Mart.
Retail sales Consensus Forecast for May 08: +0.5 percent
Range: -0.3 to +0.8 percent
Retail sales excluding motor vehicles Consensus Forecast for May 08: +0.7 percent
Range: +0.2 to +1.3 percent
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Nearly 75 percent of the time, changes in monthly retail sales are between +1 percent and -1 percent. However, there are many months in which the monthly change falls outside that range. Most of the time, excessive increases or decreases are due to higher/lower spending on motor vehicle sales. Year-over-year changes in retail sales can be volatile as well, but tend to be smoother than monthly changes. |
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