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By the Numbers

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

The economic analysis we previously featured in By the Numbers is now available on the Western Asset Blog. This page will no longer be updated.

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 43 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.

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