Mixed Report on Retail Sales

Retail sales growth in April were largely flattish sequentially while showing annual gains, according to data released by the National Retail Federation and the United States Department of Commerce this week.

Commerce reported that April retail sales at $434.6 billion were up 0.1 percent compared to March and up 4.0 percent compared to March 2013, and excluding automobiles, retail and food services sales in April came in at $347.5 billion, which was flat sequentially and up 2.7 percent annually. Total retail sales from February through April are up 3.3 percent annually.

The NRF said that April retail sales, which exclude automobiles, gas stations, and restaurants, were flat on a seasonally-adjusted and sequential basis, while seeing a 4.7 percent unadjusted annual increase.

“Even though retail sales were weaker than anticipated, the fundamentals of the economy, including improving job growth and income gains, remain positive,” NRF Chief Economist Jack Kleinhenz said in a statement. “While the shift in Easter played into the seasonal figures, NRF remains optimistic that retail sales will keep their positive trajectory, albeit in fits-and-starts, in the second quarter.”

As previously reported, with retail sales growth still relatively modest, there still remains a mixed bag of signals and headwinds on the economic front, including a slightly declining unemployment rate, improving consumer confidence data, as well as encouraging automotive sales and housing data and difficult winter weather conditions.

And these things continue to occur, though, against the backdrop of sluggish GDP growth and general uncertainty regarding the economy.

Stifel Nicolaus analyst John Larkin said at last month’s NASSTRAC conference that it is reasonable to expect retail sales to be somewhat tempered as a large amount of U.S. consumers are still recovering from the Great Recession. He supported that thesis by explaining that housing is at about 40-to-45 percent of the peak levels from January 2006, coupled with a year-to-date decline in automobile sales although production is up.

But there are positive signs afloat too.

U.S. consumer confidence is approaching pre-recession levels, according to recent data from the The Nielsen Global Consumer Confidence Index cited in a Reuters report. This index made the case for better times ahead for the U.S. economy based on the following points: an increase in consumers putting more money into savings accounts; a decline in unemployment numbers, and increasing equity and home prices, among others.
Nielsen noted that continued consumer confidence will be contingent on further gains in the labor and housing markets along with sound economic policy.

IHS Global Insight U.S. Economist Kristin Reynolds had a positive spin on April’s retail sales data in a research note.

Retail sales for April coasted along after March jumped more than any month since March 2010,” Reynolds notes. “Pent-up demand from the disruptive winter weather months – January was even weaker than originally thought - was released in March, and April held onto a similar year-over-year pace of 4.0 percent. This is a relatively good report showing that consumers were quick to make up for the shopping they didn’t do in January. Looking ahead, we expect that the improving employment picture and consumer mood at elevated levels will lead to a solid second quarter for retail sales.”

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