Retail sales surprised in May by declining 0.3 percent with some of the decline coming from lower gasoline prices. However, the weakness was not circumscribed only to gasoline sales.

Retail Sales Hit Hard by Gasoline and Electronic Stores

Retail and food services sales for May declined 0.3 percent versus expectations of a flat reading after an increase of 0.4 percent in April, unrevised. Most of the decline came from a 2.4 percent drop in gasoline sales as gasoline prices decreased during the month. However, the May report was weak overall, which means that other sectors were not able to overcome the weakness in gasoline sales. The largest month-on-month drop was reported in electronics & appliances stores sales with a decline of 2.8 percent. However, this sector is much smaller than gasoline sales, which makes the decline less impactful on the overall retail sales number. Meanwhile, motor vehicles & part dealers’ sales were down 0.2 percent after a strong, 0.5 percent increase in April.

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Interestingly enough, clothing & clothing store sales, a sector that has been weak in the past several years, posted a growth rate of 0.3 percent after an increase of 0.2 percent in April. Sales of sporting goods, hobby, book and music stores were down 0.6 percent in the month after increasing 0.4 percent in April while sales at general merchandise stores were down 0.3 percent. Within this last sector, department stores sales were down 1.0 percent, continuing the trend we have seen over the last several years.

Bucking the weak trend in May were sales of non-store retailers increasing 0.8 percent after a strong 0.9 percent increase in April and furniture & home furniture stores, up 0.4 percent after a decline of 0.3 percent in April. Meanwhile, building material & garden equipment & supplies dealers’ sales took a breather in May, as they remained flat after an increase of 0.6 percent in April.

The service side of the retail report, food services & drinking places, was also weak during the month, declining 0.1 percent after a decline of 0.2 percent in April. However, the goods cousin of this sector, food & beverage store sales, was up 0.1 percent in May. Meanwhile, health and personal care store sales were flat in May after increasing strongly, up 0.8 percent, in April.

Control Group Sales Flat in May

Although control group retail sales, which go directly into the calculation of GDP, were flat in May, they were revised up strongly in April, from an original print of 0.2 percent to an increase of 0.6 percent, which means that the second quarter of the year started on a relatively strong footing for personal consumption expenditures (PCE).

Furthermore, the fact that the retail report is in nominal terms while inflation has been slowing down considerably will help real numbers remain strong during the second quarter of the year. While this does not help retailers wanting more revenues, it will help real economic activity during the second quarter of the year.

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