– May 15, 2018

Retail sales data released today suggest that U.S. economic growth was solid in the last three months. Retail sales rose 0.3 percent in April following a 0.8 percent increase in March. Over the past three months, retail sales have risen 0.5 percent compared to the prior three months and 4.6 percent compared with the same three-month period last year.

The April gain in retail sales was led by strong increases in clothing stores (1.4 percent), miscellaneous store retailers (0.9 percent), non-store retailers (0.5 percent), and gasoline stations (0.8 percent), though this latter category often reflects the volatile price of gasoline. Non-store retail sales now account for just over 11 percent of total retail sales and 15.8 percent of retail sales excluding vehicle and gas sales.

Among other categories, general-merchandise stores rose 0.3 percent for the month while building-materials and garden-equipment store sales rose 0.4 percent, the same gain as grocery stores.

The weakest categories for April were health and personal-care stores (−0.4 percent), restaurants (−0.3 percent), sport-goods, hobby, and book stores (−0.1 percent), and electronics stores (−0.1 percent).

Over the past year, retail sales gains have been led by gasoline (up 11.7 percent), driven primarily by price increases, non-store retailers (online shopping; up 9.6 percent), furniture store sales (up 6.1 percent), auto sales (up 4.8 percent), building-materials and garden-equipment stores (up 4.4 percent), and miscellaneous store sales (up 4.1 percent).

Consumer spending overall appears well-supported by a strong labor market. Employers continue to add to payrolls, having created 168,000 new private sector jobs in April, bringing the 12-month total to 2.3 million. Those new jobs have helped push the unemployment rate down to 3.9 percent, the lowest since 2000. Furthermore, initial claims for unemployment insurance are near a four-decade low and the number of open jobs is at an all-time high. The tight labor market has helped push wage increases to a 12-month gain of 2.6 percent, near a cycle high but still moderate by historical comparisons. The combination of a strong labor market and solid wage gains have helped boost consumer confidence to a high level. In aggregate, these data all suggest solid support for further gains in consumer spending and solid growth for the economy overall.

Robert Hughes

Robert Hughes joined AIER in 2013 following more than 25 years in economic and financial markets research on Wall Street. Bob was formerly the head of Global Equity Strategy for Brown Brothers Harriman, where he developed equity investment strategy combining top-down macro analysis with bottom-up fundamentals. Prior to BBH, Bob was a Senior Equity Strategist for State Street Global Markets, Senior Economic Strategist with Prudential Equity Group and Senior Economist and Financial Markets Analyst for Citicorp Investment Services. Bob has a MA in economics from Fordham University and a BS in business from Lehigh University.
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