Implications: Today's retail sales report shows consumers are not only venturing out again after a very harsh winter, but making up for lost time. After falling in December and January, overall retail sales have increased at an 11.8% annual rate in the past two months. Sales of autos led the way growing 3.1% in March, the largest monthly gain since September 2012. But the spike in sales in March is not just due to volatile auto sales. "Core" sales, which exclude autos, building materials and gas, rose 0.9% in March and were revised higher for previous months. These "core" sales are a key input into the GDP data and it looks like "real" (inflation-adjusted) consumer spending, goods and services combined, grew at a about a 2% annual rate in Q1, in spite of the brutal winter weather throughout much of the country. To put this in perspective, over the past three years, real consumer spending is up at a 2.1% annual rate. For consumer spending to grow over this winter at basically the same trend as the past three years, the underlying fundamentals must be improving. And when we look at debt levels, wage growth and employment gains, we think these gains are sustainable. The one caveat is that real GDP growth likely slowed in Q1 to about a 0.5% rate. But this is largely due to a temporary issue with inventories and we expect real GDP to sharply re-accelerate in Q2. The Plow Horse, recently de-iced, is picking up his pace.
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Posted on Monday, April 14, 2014 @ 10:23 AM
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