Retail sales started the second quarter on a strong footing with an increase of 0.9% month-on-month (m/m), in line with the consensus estimate. Moreover, March’s reading was revised up to 1.4% m/m from 0.5% m/m reported previously, which makes today’s number stronger than the headline appears.
Sales at autos & parts dealers rose by 2.2% m/m, while March’s first estimate was revised up to -1.6% (vs. the 1.9% decline reported earlier). Solid growth and upward revisions were seen in both auto dealers and automotive parts & tire stores, where sales increased by 2.2% m/m and 2.0% m/m, respectively. Excluding autos, retail sales were up 0.6% m/m in April.
Sales at gasoline stations were down by 2.7% m/m, while building materials retailers reported a modest pullback of 0.1% m/m.
Sales in the “control group”, which excludes the above categories and are used in calculating personal consumption expenditures (and GDP), were up by 1.0% m/m. Previous month’s sales were revised to a much stronger 1.1% m/m from the advance reading of -0.1% m/m.
Within the group, the only categories in the red were sporting goods & music stores and food & beverage stores where sales declined by 0.5% and 0.2% m/m, respectively.
The rest of the categories reported gains with miscellaneous stores retailers (+4.0% m/m) leading the pack, followed by non-store retailers (+2.1% m/m), and food services & drinking places (+2.0% m/m). March’s sales at all of these categories were revised up.
Key Implications
March’s upward revisions helped retail sales finish the first quarter of 2022 at 3.4% – higher than we originally expected, which will push Q1 spending a bit higher than what was initially reported (2.7% q/q ann.) in the advanced estimate of GDP. Combined with decent growth in April, real consumption is on track to grow at 2.3% (annualized) in the second quarter. This means that consumer spending will continue to prime the economy.
Drilling down to details, adjusted for inflation, demand for “going out” categories continued to increase with sales at clothing stores and food services & drinking places each growing by 1.5%. Meantime, despite the slump in nominal terms, our real estimates of sales at gas stations are showing growth of almost 4%, which suggests that a modest decline in April’s gas prices was enough for drivers to fill up their tanks.
Indeed, while elevated prices continue to reduce consumer purchasing power, consumers have no plans on cutting back. According to New York Fed’s April Household Spending Survey, expected growth in monthly expenditures was the highest since the survey began in August 2015. Growth in essential spending remains the biggest driver, while the median expected growth in nonessential spending remained unchanged and above the historical trend. When making plans for large purchases, consumers reported that they are more likely to splurge on vacations, supporting our expectations for a further acceleration in services spending.
