Headline US retail sales rose just half as much as expected in April, but underlying gauges of nominal spending were strong, according to data released on Tuesday.
Taken together, the figures suggested the American consumer is still holding up. Or maybe still paying up is more apt.
The 0.4% headline increase compared unfavorably to the 0.8% gain consensus expected. The range of forecasts from nearly six-dozen professional guessers was -0.1% to 2%.
March’s headline print was revised to show a shallower decline.
Excluding autos and gas, sales rose 0.6%, though, triple the expected gain. I should emphasize that economists generally thought April’s spending impulse would be driven (no pun intended) by autos and gas stations. So, the juxtaposition between the headline miss and the very large beat on the underlying gauge was that much more surprising.
Even more importantly, the control group was robust. A 0.7% increase there easily outpaced the 0.4% consensus.
Seven of 13 categories rose last month versus just three in March. Spending at non-store retailers jumped 1.2% and food services and drinking places, the only services sector category in the report, rose 0.6% after a more modest advance the prior month.
I suppose you could argue the numbers are stale in the context of the very poor preliminary read on May consumer sentiment in the University of Michigan poll, but then again, consumer sentiment has been depressed for over a year and it hasn’t translated into collapsing consumption.
If anything, Tuesday’s numbers underscored the uphill nature of the Fed’s battle to curtail Americans’ inclination to spend until there’s no more money. New York Fed data released earlier this week showed the nation’s overall credit card balance failed to decline during the first three months of 2023. It was the first time Americans didn’t pay down their card balances during Q1 in at least two decades.
“There is nothing in this series that will take a June rate hike off the table — although we are doubtful one comes to fruition,” BMO’s Ian Lyngen remarked, of the retail sales report. “Instead, the Fed will err on the side of retaining terminal for as long as possible as economic headwinds continue to mount but remain contained for the time being.”
Meanwhile, Home Depot just posted the biggest revenue miss in 20 years (at least according to the hyperbolic CNBC headline I quickly scrolled past).
One of the biggest conundrums of this manic cycle, I would expect such depressed consumer sentiment to manifest in reduced spending but spending continues, something does not add up, if consumers are really as dour as the data portends then retail sales have to start showing signs of caving at least a little, puzzling.
If you have student loans, you could be depressed about future consumption because the clock on loan repayment is about to be re-started, but still consuming because you have “excess” money now.