April US retail sales were flat, broadly in line with consensus (+0.2%) expectations. Overall the report was disappointing continuing a recent trend of disappointing sales. However, digging into the subcategories, there is underlying strength in consumption as opposed to hints of a retrenching household sector.
Over the past year, retail sales in building supply stores, cars, non-store retailers, and restaurants have been very strong. We do not believe there would be such strength if households were pulling back from spending, said Barclays Capital
Rather, at least some of the overall weakness in nominal sales has been driven by falling prices. This is obvious for gasoline sales, with consumer energy prices falling almost 20% this year; but, the large decline in electronics prices also more than explains the decline in retail electronics sales.
In contrast, we see broad-based weakness in April IP, which declined for the fifth consecutive month. The weakness was concentrated in consumer durables and machinery. In a positive sign, however, motor vehicle production continued its rebound following a soft spot early in Q1, adds Barclays
