U.S. Retail Sales Post a Solid Gain in April, But Higher Prices a Factor

Retail and food services sales rose 0.5% month-over-month (m/m) in April, in line with consensus expectations. However, sales gains were largely due to higher prices, with inflation picking up in April, real retail and food services sales fell 0.2% m/m.

To no surprise, higher gasoline prices were part of the story, with sales at gasoline stations rising 2.8% m/m after a 14% increase in March. Meanwhile, sales of autos and parts fell 0.4% m/m and building materials and garden retailers rose only 0.1% m/m.

Looking at the “control group”—which excludes volatile sales of gasoline, autos & parts and building materials and garden equipment— sales rose 0.5% m/m, also in line with expectations. Sales in other categories were mixed. Furniture and home furnishings stores gave back March’s gain (-2.0% m/m), clothing sales fell (-1.5% m/m), while general merchandise stores (+0.1% m/m) and health and personal care stores (-0.0% m/m) were basically flat. Strength was seen in electronics and appliances (+1.4% m/m) and sporting goods stores (+1.4% m/m).

Sales at non-store retailers, mostly online sales, posted another solid monthly increase (+1.1% m/m), and were up 11% from a year-ago.

Spending at bars and restaurants – the only service category included in the report – rose a healthy 0.6% m/m in April after a soft March reading.  Zooming out on the longer-trend spending is only up 2.8% y/y, down from 6.9% growth a year ago.

Key Implications

As expected, retail and food services—which are measured in nominal terms—rose in April, boosted by higher prices. The drop in real sales does come after two solid months in February and March, and real sales are up 1.0% y/y. The softness in real terms is mitigated somewhat by a decent gain in “core” sales in April, coming on top of upward revision to the prior two months. Core sales were up a solid 5.7% y/y, pointing to still solid gains in real terms, and recent trends point to renewed momentum after a soft winter.

Overall, the upward revisions to prior months should give a bit of a boost to consumer spending in the first quarter, and have started the second quarter with decent momentum. That said, consumers are still contending with higher gasoline prices May, and that is likely to take a toll on discretionary purchases. In the near-term, higher tax refund checks and lower income taxes will provide some cushion.