Retail spending lifted by strong May and revisions

The U.S. retail sales trend in 2018 suddenly looks stronger as a result of a healthy month of May and upward revisions to prior months as reported by the government.

Sales are up about 4.5% year-to-year for the first five months. That’s more than half a percentage point stronger than the (YTD) pace reported a month ago for sales excluding autos, fuel, and restaurants.

Despite the improvement, the sales pace remains down from robust holiday gains, which approached 5.5% for November-December. The trend also remains divided between leaders—e-commerce, clothing, and home improvement stores—and laggards (e.g., electronics, drug stores).

Below are highlights from the latest retail view of the consumer economy.

  • May signs. May results exceeded the year-to-date pace. Seasonally adjusted gains reached 4.9% and unadjusted gains reached 5.4% for sales excluding autos, fuel, and restaurants. Mass retailers joined the channel leaders to boost sales gains in May.
  • The fuel threat. Total retail sales grew at an even stronger rate in May, largely because of double-digit growth in fuel sales as a result of higher gasoline prices. Restaurant sales also jumped in May after a lackluster start to the year.
  • Leaders. Besides e-commerce, clothing stores gained further strength in 2018 with a strong May (+5.9%). Home improvement stores (+5.2%) rebounded from a weak April. Mass stores (+5.0%) were likely led by supercenters, warehouse clubs and dollar stores.
  • Millennial boost. The strong May results were likely led by Millennial shoppers. They were the generation showing stronger confidence to spend in May and beyond. See related post here.
  • Laggards. Furniture and home furnishings stores slipped in May (+3.5%) below their healthy year-to-date pace. Weak or negative growth persists at various specialty stores (e.g., electronics, sporting goods, books, etc.). Drug stores remain near 3.0% growth.
  • The food price threat. Grocery stores are showing signs of stronger year-to-year growth (~3.5%). This is partly because of rising food prices, which will lead an inflation threat—with fuel prices—to consumer spending going forward. See related post here.

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