By the Numbers

Featuring brief segments of economic analysis from our senior economist Michael Bazdarich, PhD.

Sign up to receive an email as pertinent data are released.

April Retail Sales Fail to Offset 1Q17 Softness

Retail sales registered a tepid rebound in April, following generally soft growth in the first quarter. Headline retail sales were up 0.4% in April, after swings of +0.1% and -0.2% in March and February, respectively. Our control sales measure, excluding vehicles, building materials and gasoline, was up 0.2%, following +0.6% and -0.2% swings in March and February.

That March increase in control sales came thanks to benchmark revisions announced two weeks ago by the Census Bureau. Those revisions indeed showed stronger sales growth in March, but weaker sales growth in late-2016, and the latter downward revisions almost exactly offset the March upward revision.

In other words, as seen in the accompanying chart, for the last six months as a whole, retail sales growth has been 3.4%, down from 4% +/- growth over most of 2015 and 2016. The recent slowing in retail sales growth is not drastic and not a worry, but it conflicts with the market narrative that consumers are supposedly accelerating their spending.

Of course, the real softness in consumer spending in 1Q17 came on the services side, some of it driven by especially weak utilities spending, but most of it coming in more substantive areas. The retail sales data today don’t say anything definitive about how services spending will proceed in 2Q17, but the lack of a more definitive rebound in retail in April is a disquieting sign right off the bat as we start to receive more 2Q17 data.

Within store types, there was a nice rebound in electronics sales in March and April, after that sector’s sales had plodded lower throughout 2015 and 2016. Department and clothing stores had shown some signs of life in recent reports, but that was quashed by downward revisions and/or April softness. Retail car sales also continued their softer recent trends.

We have commented previously that whether or not the recent payroll job gains are consistent with full employment, they are clearly slower than what we saw in 2014 and 2015, in which case it was questionable how consumer spending could pick up the way consensus expectations seemed to be calling for. The recent retail and consumer spending data underline our doubts.

Retail Sales Trends
Retail Sales Trends

Source: Census Bureau. As of 30 Apr 17. “Control” retail sales is total sales less vehicle dealers, service stations and building materials stores.

Michael Bazdarich

Product Specialist/Economist

Mike brings more than 40 years of experience to his position. "By the Numbers" will address economic data releases that are pertinent to a broad range of investors.

Prior to joining the Firm in 2005, Mike ran his own consulting firm, MB Economics. He earned his PhD in Economics at the University of Chicago.

Sign up to receive an email as pertinent data are released.

© Western Asset Management Company 2017. This publication is the property of Western Asset Management Company and is intended for the sole use of its clients, consultants, and other intended recipients. It should not be forwarded to any other person. Contents herein should be treated as confidential and proprietary information. This material may not be reproduced or used in any form or medium without express written permission.
Past results are not indicative of future investment results. Investments are not guaranteed and you may lose money. This publication is for informational purposes only and reflects the current opinions of Western Asset Management. Information contained herein is believed to be accurate, but cannot be guaranteed. Opinions represented are not intended as an offer or solicitation with respect to the purchase or sale of any security and are subject to change without notice. Statements in this material should not be considered investment advice. Employees and/or clients of Western Asset Management may have a position in the securities mentioned. This publication has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information, you should consider its appropriateness having regard to your objectives, financial situation or needs. It is your responsibility to be aware of and observe the applicable laws and regulations of your country of residence. Potential investors in emerging markets should be aware that investment in these markets can involve a higher degree of risk. Any forecast, projection or target is there to provide you with an indication only and is not guaranteed in any way.
Western Asset Management Company Distribuidora de Títulos e Valores Mobiliários Limitada is authorised and regulated by Comissão de Valores Mobiliários and Banco Central do Brasil. Western Asset Management Company Pty Ltd ABN 41 117 767 923 is the holder of the Australian Financial Services Licence 303160. Western Asset Management Company Pte. Ltd. Co. Reg. No. 200007692R is a holder of a Capital Markets Services Licence for fund management and regulated by the Monetary Authority of Singapore. Western Asset Management Company Ltd is a registered financial instruments dealer whose business is investment advisory or agency business, investment management, and Type II Financial Instruments Dealing business with the registration number KLFB (FID) No. 427, and members of JIAA (membership number 011-01319) and JITA. Western Asset Management Company Limited (“WAMCL”) is authorised and regulated by the Financial Conduct Authority (“FCA”). In the UK this communication is a financial promotion solely intended for professional clients as defined in the FCA Handbook and has been approved by WAMCL.