U.S. consumer spending beat expectations handily in May. U.S. retail sales jumped 1.2% in the month, the second fastest pace in over a year, with nearly all store types benefiting from stronger spending. And, there were upward revisions to the prior two months, particularly so for March.
Core retail sales (excludes autos, gas stations and building materials), which are fed into the GDP report, were also impressive, up 0.7% in the month, biggest gain since March and the 2nd largest in one year.
Not only is this good news for 2nd quarter growth, but the March revision suggests that there was 1) a strong handoff to Q2 and 2) the final reading for Q1 GDP could be revised higher.
"The retail sales report is not the be-all and end-all reports to measure consumer spending. But the whole package is looking heartier. Robust job growth, near decade-high auto sales, revolving credit rising at its 2nd fastest pace in eight years, and now, solid retail sales....looks like Q2 GDP estimates will be revised higher. Ours will be." said BMO Capital Markets
