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.

May Retail Sales Continue Better Growth Trends Initiated a Month Ago

Retail sales grew nicely in May, with headline sales up 0.5% and April sales revised up a bit. Our control sales measure, excluding vehicles, gasoline and building materials but including restaurants, was up 0.5%, and the April level was revised upward by 0.2%.

So, the May sales gains were not as strong as those of April, but they were a nice follow-through, given how strong April sales were. As seen in the accompanying chart, control sales moved further above 2012–14 trends over the last 2 months after having first moved above trend about a year ago (and then languishing in late-2015).

Sales gains continued strong at nonstore (online) retailers and there were also good gains at bookstores, sporting goods stores and grocery stores. Meanwhile, sales continued sluggish at department stores, apparel stores and car dealers, and sales have weakened markedly in the last few months at building material stores.

The good sales growth in April and May should dampen any recession fears that have been surfacing recently. It could also bring July back in play for a Fed rate hike, provided next month’s jobs report is markedly better than what we saw this month. However, it doesn’t change our forecast of soft underlying GDP growth, 1.5%, rather than the 2.0%–2.5% the Fed and many market mavens are calling for.

Capital spending and export trends continue soft. With most of the goods purchased by consumers at retail stores being imported, we see nothing across the range of data suggesting better growth for the US manufacturing sector. And soft factory growth is the baseline for our slow-growth outlook.

So, again, the retail report should stem downside fears, but it is probably not a harbinger of upside risks for US growth.

Retail Sales Trends
US Economic Growth: Real and Nominal
Source: Census Bureau. As of 31 May 16. "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.