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Retail Sales (Apr.)

Never bet against the US consumer

  • Never bet against the US consumer has always been a good adage to bear in mind throughout my 20-plus years in the markets. Despite the surge in prices weighing on their purchasing power, the US consumer now appears to be single-handedly keeping the global economy afloat again.
  • Admittedly, the 0.9% m/m increase in retail sales in April was merely in line with consensus. But there were also very big upward revisions to gains in earlier months, with the March increase now estimated to have been 1.4%, rather than 0.5%. The April gain is more impressive, however, because consumer prices increased by a more muted 0.3% m/m last month, compared with 1.2% in March.
  • The April increase also came despite a price-related 2.7% m/m drop back in gasoline stations sales. Motor vehicle sales rebounded by 2.2% and, with production gradually recovering from supply shortages, there is scope for further gains in sales in the coming months. The big surprise is that, stripping out gas, autos and building materials, control group sales increased by 1.0% m/m in April (consensus 0.5%) and sales are now estimated to have increased by 1.1% in March (previously a 0.1% decline). As Chart 1 shows, the three-month-on-three-month annualised growth rate hit a 10-month high of 10.4%.
  • Looking at the April details, the gain was driven by a 4.0% m/m increase in the miscellaneous component. But the 2.0% m/m increase in food services illustrates that, with COVID less of a concern, high-contact services activity is back. Food services sales are now 22% above the pre-pandemic peak.
  • Given this show of strength from consumers, speculation that the US economy is in danger of an imminent plunge into recession look badly misplaced. Together with the surprising strength of core CPI last month, this is another reason to expect the Fed to continue hiking rates by 50bp per meeting, despite the recent swoon in stock markets.

Chart 1: Control Group Sales (Excl, Gas, Autos, Build. Mats, & Food Services)

chart001-181.png

Source: Refinitiv

Table 1: Retail Sales Values

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

Retail Sales (%m/m)

-1.0

1.1

-1.0

0.7

1.0

1.6

0.6

-1.6

2.7

1.7

1.4

0.9

Retail Sales (%y/y)

27.9

19.9

15.8

15.9

14.5

15.0

19.9

16.1

13.4

17.6

7.3

8.7

Core Sales (Excl. Autos)

-0.3

2.0

-0.1

1.2

1.0

1.5

0.5

-1.4

1.6

1.7

2.1

0.6

Control Group Sales

-1.0

1.8

-0.6

1.1

0.7

1.2

0.1

-1.9

3.0

0.1

1.1

1.0

Source: Refinitiv


Paul Ashworth, Chief US Economist, paul.ashworth@capitaleconomics.com