The Economy

Retail Sales Show Another Strong Gain in May

The 0.5% increase last month follows April's 1.3% surge, supporting the view that U.S. growth is rebounding.
Matthew HellerJune 16, 2016

U.S. retail sales had another strong month in May, avoiding a slowdown from April’s surge as categories including cars, clothing, and online retail posted solid gains.

The Commerce Department said retail sales increased 0.5% last month after gaining 1.3% in April. Economists had been expecting growth to slow to 0.3% in May.

Sales last month were up 2.5% on May 2015 and “core” sales, excluding automobiles, gasoline, building materials, and food services, rose a solid 0.4% after an upwardly revised 1% increase in April.

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“The modest first-quarter disappointment in consumer spending now appears to be a short-lived soft patch,” Michael Feroli, an economist at JPMorgan, told Reuters. “This number also lends credence to the idea that the big miss on May payrolls may have been sending an overly pessimistic signal on growth.”

Car sales rose by 0.5% with spending on fuel at service stations up by 2.1%, reflecting the increase in oil prices, while clothing store’ sales (up 0.8%) had their largest gain since November and online retail sales climbed 1.3%.

According to CNBC, the May data could lead economists to raise their second-quarter GDP growth estimates, which are currently around a 2.5% annualized rate. The economy grew at a 0.8% rate in the first quarter. Core retail sales correspond most closely with the consumer spending component of gross domestic product.

The report “provides strong support to the view that U.S. growth is rebounding,” Credit Suisse economist Jeremy Schwartz wrote in a note to clients. “While the recent slowdown in payrolls is still a concern, the persistence of strong consumer spending suggests household fundamentals are not breaking down significantly.”

Two categories that saw sales drop were building materials and garden equipment. Furniture store sales also dipped. Americans “boosted discretionary spending, splurging on sporting goods and hobbies, frequenting restaurants and bars, and buying electronics and appliances,” Reuters said.

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