April retail sales data issued by Commerce and NRF heads up

Data issued today by the United States Department of Commerce and the National Retail Federation (NRF) for April retail sales were similar in that they showed mild sequential gains and larger annual gains.

Retail sales represent somewhere around two-thirds of all economic activity, and that U.S. retail sales contribute around 14 percent, or $2.6 trillion to U.S. GDP. That is a major number and clearly cannot be overlooked, especially when looking at how closely connected retail and consumer activity is tied to the freight transportation and logistics sectors on so many fronts, including trucking, intermodal, parcel, ocean, air, and e-commerce.

Commerce reported a 0.4 percent increase from March to April at $474.9 million and a 4.5 percent gain over April 2016. The sequential gain marked an improvement over a 0.1 percent increase from February to March, and the annual gain was off from a 5.2 percent annual increase in March. And total retail sales from February through April were up 4.7 percent annually, according to Commerce.

The NRF reported that April retail sales, excluding automobiles, gas stations, and restaurants, saw a 0.3 percent seasonally-adjusted increase over March, and were up 3 percent on an unadjusted annual basis.

The NRF added that on a three-month moving average, retail sales have grown 2.6 percent annually. April retail sales, it explained, were driven by online and other non-store sellers, electronics stores, and building materials and supplies. Compared to April 2016, the clothing and accessories segment was up of 1.7 percent, and general merchandise was up 0.8 percent.

April online and other non-store sales (e-commerce) headed up 1.4 percent on a seasonally-adjusted basis over March and were up 9.4 percent on an unadjusted basis annually, the NRF said. Commerce reported that nonstore retailers April sales increased 11.9 percent annually.

“While the interplay between consumer confidence and spending is difficult to gauge, retail sales trends and recent consumer sentiment readings are consistent with a pickup in the pace of the economy in the coming months,” NRF Chief Economist Jack Kleinhenz said in a blog posting. “Retailers are multi-tasking as they attempt to get the right mix among products, inventory, employment, promotions and use of technology. The housing recovery has been an important variable in consumers' willingness to spend. Low retail price inflation has continued, drawing in shoppers but providing heartburn to the bottom line for many retailers.”

This data follows recently announced 2017 retail sales projections from the NRF, calling for an annual gain in the 3.7-to-4.2 percent range, with online and other non-store/online sales (which NRF includes in its over all number) to head up between 8 and 12 percent.

While not a direct comparison, NRF's 2017 projection would top the 3.3 percent annual gain in retail sales from 2015 to 2016, based on data issued by the United States Department of Commerce.

As previously reported, the NRF offered up various data points supporting its thesis for retail sales growth in 2017, including:
-the economy is expected to gain an average of approximately 160,000 jobs a month, which it said is down slightly from 2016 but consistent with labor market growth;
-unemployment is expected to drop to 4.6 percent by the end of the year; and
-economic growth is likely to be in the range of 1.9 to 2.4 percent

And it offered up a caveat in that the “forecast is a baseline and does not take into account new fiscal measures pending in Washington.”

That is important to consider when considering, as NRF President Matthew Shay pointed out, that 2016 finished with strong momentum as jobs and income saw growth, coupled with debt staying on the lower side. But the optimism is quelled to a degree, he noted, in that while consumers appear to have the resources to spend more than in the past, there is likely to be some hesitancy until there is more clarity in regards to policy changes regarding taxes, trade, and other issues.

With consumer spending accounting for around two-thirds of all economic activity, that commensurate growth, or projected growth, is contingent on consumers being able to change behavior, or, in other words, consistently spend more.

IHS Markit Senior Research Director Sara Johnson was relatively optimistic about April's retail sales performance.

“Retail sales increased a solid 0.4% in April, better than the slim 0.1% gain in March but not the breakout performance markets had hoped to see,” she commented in a research note. “With today's CPI report showing goods prices up just 0.1% in April after a 0.7% drop in March, inflation-adjusted retail sales are clearly on an upward trajectory entering the spring quarter. The near-term outlook for consumer spending remains favorable: rising employment, real incomes, and household wealth should fuel a pickup in growth. Yet, with April sales a bit weaker than anticipated, we are trimming our projected of annualized growth in real consumer spending during the second quarter from 3.4% to 3.1%.”

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