Retail Sales Drop in April

April retail sales were weaker than anticipated, falling -.2% MoM (consensus +.4%). This was the first decline since last September. Offsetting April's weakness were revisions higher for the prior month. The headline figure was increased to +1% from +.7%, and ex-autos was revised higher to +1.1% from +.8% in March. These March revisions will improve first quarter GDP growth.

Consumer spending accounts for about 70% of U.S. GDP, so a pullback in consumption raises concerns about the vitality of the U.S. economy. What is interesting too is that retail spending is falling as credit card usage is rising. It appears that consumers may be getting strapped for cash as the jobs market has slowed. Sales at Wal-Mart fell 3.5% in April, as discount and department stores saw their weakest monthly sales in over 35 years last month.

Higher gasoline prices are clearly negatively impacting spending on other goods. Sales excluding automobiles and gasoline fell -.2% MoM, the largest decline in over two years for this category. Higher volumes and prices pushed gas station sales up +1.7% MoM. Gas prices rose an average of 26 cents in April versus May, leading to an increase of $30 per month for the average household, and $20 Billion nationally.

The government uses retail sales excluding autos, gasoline and building materials to help calculate GDP. This category dropped -.1% MoM in April after rising +.9% MoM in March. The excluded categories are included in GDP from other sources.

Areas showing improved sales in April include electronics, grocery stores, catalog sales and furniture. Weakness was seen in building materials, clothing, and autos. Department stores sales fell -2.1% MoM and are down -4% YoY.

Versus a year ago, retail sales rose +3.1% in April, down from a 4% average over the previous six months.