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: There's Life in the Consumer After All

Retail sales grew nicely in April, with headline sales up 1.3%, and the "control" measure we track up 0.8%, on top of a 0.3% upward revision to March sales levels. The data are summarized in the accompanying chart.

As seen there, after rising above trend in late-2014, underlying sales levels had been moving back toward trend over the past year, with the last 3 months of data looking especially lackluster. Then along came today's better report.

On the heels of 3 consecutive soggy sales months, a softer headline jobs number and glum reports from major retailers, there was concern across the markets for retailing heading into today's data. Presumably, the better results announced today will dispel some of that gloom.

No, the consumer is not tanking. Consumer spending growth is not accelerating so as to offset the drags from capital spending and exports, but it is holding steady, rather than piling onto those drags. All in all, we think the data remain consistent with GDP growth in the mid-1% range, with little downside or upside risks around that rate.

The details within the retail report were a bit less spectacular. Auto sales were up a nice 3.2% in April, charging the headline gain, but that merely offset a -3.2% print in March. In other words, on net, auto sales have still gone flat over the past 7 months. There were similar gains in April sales at electronics stores, offsetting similar declines in late-2015 and leaving sales there still down substantially from 2015 levels.

The clear winners in the report were "nonstore retailers," mostly online vendors. Their sales rose 2.1% in April, on top of steady gains in previous months. These gains were the main driver behind the April pickup in control sales.

On the one hand, this indicates that consumer spending overall is growing okay. On the other hand, it suggests little support for traditional brick-and-mortar store expansion. I'm sorry to sound like the proverbial two-handed economist, but once in a while, the shoe fits...even when you buy it online.

Retail Sales Trends
US Economic Growth: Real and Nominal
Source: Census Bureau. As of 30 Apr 16.

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.