United States: Retail sales unexpectedly dip in April; core purchases are flat
Nominal retail sales fell 0.2% on a seasonally-adjusted month-on-month basis in April, markedly contrasting March’s revised 1.7% rise (previously reported: +1.6% month-on-month) and missing market expectations of 0.2% growth. Retail sales excluding automobiles, gasoline, building materials and food services—also known as “core” retail sales as they most closely reflect private consumption in the GDP readings—were flat month-on-month, following March’s 1.1% growth.
Aside from an expected dip in automobile sales—owing largely to a high base effect as car sales had soared in March—the April print was driven by a sizeable decline in sales of electronics and appliances, as well as building materials and gardening equipment. Surprisingly, sales at non-store retailers—a category that includes e-commerce and has consistently logged robust growth prints in past months—also contracted slightly, which suggests that spending dynamics remain soft after a feeble print for private consumption growth in the first quarter GDP reading. On the flipside, gasoline sales continued to register solid growth in April, though this was largely expected due in large part to increases in gasoline prices, as reflected by the April inflation report.
In annual terms, growth in retail sales came in at 3.1% in April, down from 3.8% in March. Meanwhile, annual average retail sales growth fell from 4.4% in March to 4.3% in April.
Despite April’s disappointing data, James Smith, an economist at ING, remains relatively optimistic regarding short-term prospects. He noted:
“We think the outlook for retail sales looks reasonably good. While wage growth has levelled off a bit since the start of the year, the tight jobs market and associated skill shortages should continue to keep the pressure on employers to lift pay faster to attract/retain talent. […] There are a couple of headwinds to spending though. The sudden rise in fuel prices will hit real wages to some degree, while the lingering threat of tariffs on the remainder of Chinese imports could also weigh on spending if they come to pass. For the time being though, we think the positives will continue to outweigh the negatives for consumption.”