May Retail Sales

Consumers counter-punched the slow economy in May with a surprisingly strong retail sales report according to the Census Bureau. The monthly increase was 0.6 percent, putting its year-over-year increase at 4.6 percent. The aggregated report was rather strong with continued strength in some areas, but there was weakness in a few curious subcategories.

Retail sales were provided a boost by autos, food & beverages, and building materials. Vehicle sales jumped 1.8 percent in May after gaining 0.7 percent in April and accounted for about half of the month-over-month improvement in the headline number. Food & beverages staged a turnaround in May after being negative in April. This was a concern for Atlas to start the second quarter because it takes a financially stressed household to cut back food purchases. Hopefully April’s weakness was an anomaly. Building materials buttressed retail sales’ increase, strengthening by 0.9 percent in May.

Some weakness was seen in a few discretionary areas. Food services and drinking places fell (i.e. eating out versus at home). This contrasts the strength of the category in April. Furniture purchases were lower, which does not square with the strength seen in the housing market; perhaps the old furniture will do. Electronics and appliance stores were down for the month and are now lower than a year ago.

The overall report was positive. This indicator represents over 20 percent of the economy, so it gets close attention. Atlas will monitor the minutia of the report to look for signs of consumer stress, but for now there does not appear to be any widespread weakening. (by C. Cox)