U.S. retail sales drop in May, personal consumption expenditures likely to grow in Q2

The U.S. advance Census Bureau report showed today that the nation’s retail sales dropped on a sequential basis in May. The retail sales dropped 0.3 percent, as compared with consensus expectations of a flat reading.

At gasoline stations, sales dropped 2.4 percent, greatly reflecting lower prices. Sales at motor vehicle and parts dealers also dropped 0.2 percent. Stripping autos and gas, U.S. retail sales remained flat on the month; however, this came atop an upwardly revised gain of 0.5 percent in April. Category wise, the sharpest decline was seen in electronics, after two months of decent gains.The ‘control group’, which excludes autos, gas, food services and building materials, also came in flat on sequential terms. However, the weak figure came atop a decent upward revision to 0.6 percent. Non-store retailers also indicated consistent gains of 0.8 percent. This category rose 12.4 percent year-on-year and continues to take market share from traditional bricks and mortar retailers.

The May report was a weak one; however, the softness was made up by the size of the upward revision to sales in March and April. Furthermore, there is some of the weakness on the price side. In real terms, personal expenditures continue to be in good stead and is likely to grow by about 3 percent in the second quarter, noted TD Economics.

Given the shift if buying patterns away from malls and toward online retailers, the advance retail sales measure has become a less dependable leading indicator. The recent pattern on spending data has been for upward revisions on subsequent estimates and might likely to continue going forward, said TD Economics.