Retail Sales Dive (And It’s Not Just Autos)

Retail sales took a 0.3 percent dive in May vs an Econoday expectation of a 0.1 percent rise.

Weakness was across the board. It must be transitory because the Fed hikes this afternoon.

Consumer spending was unusually weak in the first quarter and doesn’t look to be improving this quarter. Retail sales fell 0.3 percent in May vs Econoday’s consensus for a 0.1 percent gain. Weakness riddles the report including a 1.0 percent drop for department stores, a 0.2 percent decline for autos, and a 0.1 percent dip for restaurants. Two readings that echo price contraction in this morning’s consumer price report are gasoline stations, down 2.4 percent, and electronics & appliances stores, down 2.8 percent as phone prices continue to come down.

Other readings are likewise very weak, at minus 0.3 percent excluding autos and no change when excluding both autos and gasoline. Control group sales are also unchanged (this excludes autos, building materials, gasoline and restaurants).

Wages aren’t showing any traction and neither is consumer spending. The consumer just hasn’t been participating this year and will need to accelerate very quickly otherwise second-quarter GDP is in jeopardy. Yet expectations seem fixed that the Fed, despite consumer weakness and despite inflation weakness, is determined to raise rates at today’s FOMC.

Retail Sales March, April, May

The best way to look at things is to average recent Retail Sales reports.

1. For the second quarter, sales are up less 0.05 percent per month on average.
2. Factoring in a third month, March thru May 2017 is up a mere 0.3 percent from December 2016 through February 2017 despite retail sales floundering in the first quarter.
3. Sales in May were up 3.8% from a year ago, but GDP is this quarter vs last quarter.

Hike away.

Mike “Mish” Shedlock