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U.S. retail sales: A solid month of growth

REAL ECONOMY BLOG | May 17, 2022

Authored by RSM US LLP


American consumers continued to spend more at retail stores in April despite inflation as lower gasoline prices helped to boost spending on discretionary items. But it won’t last long as gasoline prices reached a record high in May.

U.S. retail sales rose by 0.9% in April from a month earlier.

Retail sales in the United States rose by 0.9% in April from a month earlier, the U.S. Census Bureau reported on Tuesday. With inflation running at 0.3% on the month, our estimate for sales volume pointed to a more modest increase at 0.6%.

April’s solid spending growth won’t likely change the Federal Reserve’s decision to raise rates by 50 basis points in each of the next two meetings. Instead, it will help to alleviate some of the recession concern that might stem from increasing interest rates.

Sales at retail stores showed hints of the continuing shift from spending on goods to services as purchases at restaurants rose on the month. But that data likely understated increases in overall consumer spending because it does not include spending on airline fares or transportation services, which had soaring demand and prices.

Retail sales monthly

The increase was driven by a sharp 2.2% increase in sales at auto dealers, accounting for about 19% of total sales. The figure aligned with earlier data from the Bureau of Economic Analysis, which reported 880,000 additional vehicles sold in April on an annualized basis.

But April’s auto sales remained about 3 million units below the five-year average of 17.5 million from before the pandemic as the chip shortage continued to hamper supply. We do not expect the shortage to ease anytime soon, and it might last well into 2024, according to a recent interview with Intel’s chief executive, Patrick Gelsinger.

Retail sales by group

Sales at gas pumps fell by 2.7% in April mostly because of the decline in gasoline prices, which fell by 6.1% on the month, according to last week’s Consumer Price Index data from the Bureau of Labor Statistics.

But those prices are already increasing. Weekly data from the U.S. Energy Information Administration is pointing to record high gasoline prices in May at $4.59 per gallon, 4% higher than March’s peak.

The control group—which includes all categories but autos, gasoline, restaurants and building materials—posted a 1.0% increase on the month. The increase was enough to offset core inflation in April, which came out much higher than expected at 0.6%.

That implies a solid month of spending growth as the group will feed into the calculation of gross domestic product for the second quarter.

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This article was written by Tuan Nguyen and originally appeared on 2022-05-17.
2022 RSM US LLP. All rights reserved.
https://realeconomy.rsmus.com/u-s-retail-sales-a-solid-month-of-growth/

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