United States: Retail sales show another month of solid growth

Nominal retail sales increased 0.5% in May over the previous month. The result followed a substantial 1.3% expansion in April and overshot the 0.3% rise the markets had expected. Retail sales are a good indicator of the evolution of consumer spending, which accounts for over two-thirds of overall U.S. GDP. May’s figure suggests that household spending remained healthy in Q2.

The report from the Department of Commerce showed that May’s increase reflected higher sales of motor vehicles and parts, food and sales in gasoline stations. Conversely, growth was dragged down by a decrease in sales of furniture, building materials and garden equipment. Meanwhile, the closely-watched core retail sales index that excludes cars and car parts also showed a healthy increase in May. Core retail sales increased 0.4% over the previous month, which followed a 0.6% rise tallied in April.

On an annual basis, retail sales expanded 2.5% in May, which came in below the 3.0% expansion registered in April. The 12-month rolling average of retail sales was 2.4% in May (April: +2.4% year-on-year).

FocusEconomics Consensus Forecast panelists expect private consumption to grow 2.8% in 2016, which is unchanged from last month’s forecast. For 2017, the panel sees private consumption increasing 2.6%.