May Retail Sales Much Stronger Than Expected

May retail sales rose +1.4% MoM (consensus +.6%), the best gain in almost a year-and-a-half. Last month retail sales fell a revised -.1% MoM. Most economists had expected sales to be stagnant for everything but service stations, which benefit from the rising price of gasoline. But, it appears that the consumer was more resilient than expected.

All major categories showed sales gains last month, with service stations growing the most at +3.8% MoM, its fourth monthly increase as gasoline prices have risen 50% from the low earlier this year. Sales excluding gasoline rose +1.2% MoM, the best gain since last summer. Vehicle sales grew +1.8% MoM, and department store sales saw their biggest monthly gain since 2005, rising by +1.3% MoM. Building material demand rebounded to grow +2.1% MoM, and clothing sales also improved by +2.7% MoM. The weakest growth were in furniture and food, which each grew +.3% MoM.

In calculating GDP, the government uses retail sales less autos, gasoline, and building materials (which they gather from other sources for GDP), sales jumped to +.8% MoM in May from +.1% MoM April.

Retail sales are an important barometer of economic health because they account for over two-thirds of the economy. Improving consumer spending should help support other sectors of the economy. Latest estimates are pushing 2nd quarter GDP toward 4%.