 | Retail Sales Rose 0.8% in May |
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| Posted Under: Data Watch • Inflation • Retail Sales |
Implications: Consumers are feeling great. Retail sales surged 0.8% in May, beating the most optimistic forecasts, and representing the largest gain in seven months. The gains in May were broad-based, with 10 of the 13 major categories moving higher, led by gas stations, restaurants & bars, building materials, as well as general merchandise stores (like department stores). And the past two months were revised up, as well. As a result, retail sales are up a strong 5.9% from a year ago, and up an even stronger 6.4% excluding auto sales. While we saw modest consumer spending growth last quarter - rising just 1.0% annualized in Q1 - that had more to do with the timing of growth than the trend. And today's report shows the pace of consumer spending is accelerating, supporting our projection of 4.5% real GDP growth in the second quarter. Given deregulation and tax cuts, we expect an average real growth rate of 3%+ in 2018 and 2019, a pace we haven't seen since 2005. Expect overall retail sales to continue the trend higher in the months to come. Jobs and wages are moving up, tax cuts have taken effect, consumer balance sheets look healthy, and serious (90+ day) debt delinquencies are down substantially from post-recession highs. Put it all together, and the outlook for the consumer looks bright. In other news this morning, new claims for jobless benefits fell 4,000 last week to 218,000. Meanwhile continuing claims declined 49,000 to 1.70 million, the lowest reading since late 1973, back when the labor force was roughly half the size that it is today. On the inflation front, both import and export prices rose 0.6% in May. Import prices were led higher by a 4.9% jump in prices for fuels, while agricultural exports, particularly wheat, corn, and soybeans, led export prices higher. In the past year, import prices are up 4.3%, while export prices have increased 4.9%, reinforcing other recent data showing a rising trend in inflation.
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