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US: Retail Sales Were Flat in April. Stay Tuned for Data on Services

  • Retail sales were flat month-on-month in April, below the consensus of 1% growth. March data however, was revised up to an even stronger 10.4% m/m (from 9.4%).
  • Consistent with the surge in prices, sales of motor vehicles, parts & dealers jumped by 2.9% month-on-month. Building materials and garden equipment dropped by 0.4%, while food services & drinking places gained 3% month-on-month, but remain 2% below their pre-pandemic level.
  • Excluding these groups, retail sales in the “control group” were down 1.5%, suggesting a pullback in personal consumption expenditures (data scheduled to come out at the end of the month). Within the control group, three categories reported gains: health & personal care stores (1.0% m/m), food & beverage stores (0.4% m/m), and home furniture & appliances stores (0.1% m/m). Most other categories were in the red in April, including two categories that made the greatest strides during the pandemic – hobby, book & music stores and non-store retailers posted declines of 3.6% m/m and 0.6% m/m, respectively.

Key Implications

  • The below-consensus reading is somewhat disappointing, but the fact that it comes on the back of a truly extraordinary and upwardly revised March reading softens the blow considerably. Overall, the level of retail sales is well above its pre-recession trend, reflecting the substitution of service spending for goods. As the economy continues to re-open we expect some of this to reverse, with services taking the lead in driving spending growth. April’s retail sales data may be an harbinger of this shift.
  • Indeed, April’s high-frequency data suggests that lower-income families, for whom stimulus checks provided the biggest boost continued to lead the pack in terms credit and debit card outlays. Still, spending by more affluent consumers gained momentum in April, which may prove to be a booster shot to personal consumption expenditures that also capture spending on services. According to the Federal Reserve Board of New York, high-income households typically spend relatively more on pandemic-constrained services, such as airlines, recreation, and temporary lodging, which started to come back in April.
TD Bank Financial Group
The information contained in this report has been prepared for the information of our customers by TD Bank Financial Group. The information has been drawn from sources believed to be reliable, but the accuracy or completeness of the information is not guaranteed, nor in providing it does TD Bank Financial Group assume any responsibility or liability.

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