The monthly retail sales report will be released today. The official data from the US Census Bureau is forecast to show that consumer spending in retail could slow in April.
This comes after retail sales rose the most in two years in March 2019. The strong surge in retail spending was driven by a tighter labor market and inflation that is muted for the most part. A boost to consumer confidence also added to the gains.
As a result, following the strong gains in March, the forecasts for April show that headline retail sales will rise 0.2% on a month over month basis.
Core retail sales forecast point to slightly better performance. Estimates point to a 0.7% increase on the month in April.
The retail sales report will shed light into how the US economy was faring during the start of the second quarter. After robust GDP growth in the first quarter, investors will see if the momentum can hold. Preliminary GDP estimates on the US economy saw a quarterly growth rate of 3.2%. This was a stronger than forecast increase as economists thought that the US economy would slow to a pace of 2% growth rate during the period.
Retail Sales Surges in March 2019
The retail sales report for March came out with a lot of surprises.
Data for March 2019 saw retail sales rising the most since September 2017. Retail sales jumped to 2.0% in September 2017.
This coincided with the weekly jobless claims as it fell to a new 49-year low. The strong labor market added to the view that consumers were happy spending at retail outlets.
US Retail Sales, March 2019
According to the official data, the value of the overall sales grew by 1.6% in the month of March on a month over month basis. The gains were driven by a rise in motor vehicle purchases and gasoline store receipts.
Retail sales in March rebounded from February’s unrevised 0.2% gain.
Meanwhile, retail sales in the control group, which is seen as a clearer picture of the consumer demand, rose by one percent. This also beat the conservative estimates.
The control group sales exclude services such as food, car dealers and building material and gasoline stores.
The report for March revealed that twelve out of thirteen categories in the retail sector posted growth. Clothing store sales increased the most since May last year, rising 2%.
There was also an increase in sales at non-store retailers which grew for the second consecutive month. Non-store sales rose at a pace of 1.3%. Food services grew at a pace of 0.8% marking the best monthly performance since July last year.
There were declines in sporting goods and hobby stores which were the only sectors that were weak.
Consumer Confidence to Keep the Trend Intact
Various measures of consumer confidence which keeps track of the pulse of consumers were broadly positive. There has been a moderate uptick in the consumer confidence which adds to the view that retail sales could still maintain the momentum.
The fact that the overall global economic outlook was relatively stable in April, adds to the hawkish case. The labor market report for April also came out stronger than forecasts.
The US unemployment rate fell to new historic lows of 3.6% in April compared with 3.9% in March. Wages grew at a pace of 0.2% on the month which was below estimates of a 0.3% increase.
However, the revisions to the data for March saw wages rising by 0.2% compared to 0.1%. On a year over year basis, wages have remained stable, rising at a pace of 3.2%.
The strong uptick in the labor market could potentially see the retail sales data being able to beat the estimates by at least a small margin as a result.