Sales up to higher gas prices is nothing to brag about:
The consumer showed a lot of life in May, driving up retail sales 1.2 percent with gains sweeping nearly all components. A leading component in the month was motor vehicle sales which jumped 2.0 percent, excluding which retail sales still rose a very strong 1.0 percent. Another component showing special strength was gasoline sales which got a boost from higher prices. Still, excluding both of these components, retail sales ex-auto ex-gas gained a very solid 0.7 percent. These results offset weakness in April, when total sales rose only 0.2 percent (upward revised from no change).
In contrast to weakness through most of the April report, there’s only one component showing contraction in May and that’s the usually solid health & personal care stores at minus 0.3 percent. Standouts on the plus side, apart from vehicles and gasoline, are building materials & garden equipment stores, up 2.1 percent, clothing & accessories stores, up 1.5 percent, and nonstore retailers, up 1.4 percent. Department stores, which sank a steep 2.9 percent in April, rebounded with a 0.8 percent gain.
The long awaited rebound from the soft first quarter is finally here. Today’s results will have forecasters upping their estimates for second-quarter GDP. These results will also be a key point of discussion, especially in arguments by the hawks, at next week’s FOMC meeting.
See the move up since the decline earlier in the year January? The analysts are looking at those last few months and calculating the growth rates of just that segment and saying that’s how fast the economy is growing, etc:
The % change year over year chart doesn’t look so good:
Same with vehicle sales. Yes, ‘new highs’ but the growth is slowing, which is what counts when calculating year over year growth of the economy:
All the talk about this showing where the money saved on gas was being spent has dried up:
Inventories remain elevated. Unsold inventory most often leads to a slowdown in output:
Inventories are rising in line with sales, pointing to well-balanced strength for second-quarter GDP. Business inventories rose 0.4 percent in April, just below a strong 0.6 percent in business sales and leaving the stock-to-sales ratio unchanged at 1.36.
Of the report’s three components, retail shows a slight imbalance with inventories jumping 0.8 percent against only a 0.1 percent rise in sales that lifts the sector’s stock-to-sales ratio to 1.46 from 1.45. But this is likely to reverse in the May inventory report given the enormous strength in this morning’s retail sales report for May.
Looking at the other two components, inventories at wholesalers are a little leaner than they had been, at a stock-to-sales ratio of 1.29 vs 1.30, while manufacturers are a little less lean, at 1.35 vs 1.34.