U.S. retail sales rise sharply in May, consumption growth likely to rise 3 pct in Q2

U.S. retail sales rose sharply in the month of May. The advance Census Bureau report showed that the retail sales surged 0.8 percent, while the April’s data was upwardly revised to a gain of 0.4 percent from 0.3 percent. Sales at gasoline stations rose 2 percent with auto and parts dealers recording a rise of 0.5 percent. Stripping autos and gas, retail sales also grew 0.8 percent sequentially.

Spending on building materials rose sharply by 2.4 percent after two months of declines. Spending at restaurants and bars also rose, but at a more modest pace of 1.3 percent. Stripping gas, autos, building materials, and food services, the ‘control group’ used in calculating GDP rose 0.5 percent sequentially. Gains in the control group were led by miscellaneous stores, but department and clothing stores also recorded good gains. Only two categories; furniture and sporting goods, saw declines in dollar terms – with the former coming off a strong stretch of gains.

Today’s report was one of the best retail sales reports in recent years. Today’s report implies that consumption growth would rise 3 percent in the second quarter, aiding in lifting the economic growth by over 4 percent, stated TD Economics in a research report. Furthermore, while some of the momentum in retail spending might wane from the current, arguably unsustainable rate, consumers should remain in the driver’s seat in the medium term as the U.S. economy advances from a fiscal boost, lower taxes, and a reduced regulatory burden, added TD Economics.

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