Retail sales rose 0.4% month-on-month (m/m) in April, roughly half the consensus forecast calling for an increase of 0.8% m/m. March’s reading was revised up, changing last month’s decline to -0.7% (previously -1.0%). Most of these revisions were due to the release of the 2021 Annual Retail Trade Survey on April 24th which is used as a benchmark for the monthly data.
Sales in the auto sector increased for the first time in three months, largely driven by strength in automotive parts & tire stores (+3.8). Motor vehicle sales rose by slightly less (+0.4%), up from March’s upwardly revised decline of -1.4% (previously -1.6%). Excluding autos, retail sales were unchanged at 0.4% m/m.
Sales in other more volatile categories were mixed in April. The building materials and equipment category rose 0.5% m/m while sales at gasoline stations declined 0.8% m/m.
Retail sales in the “control group”, which excludes the above categories and is used to estimate personal consumption expenditures (PCE), rose 0.7% m/m, up from a downwardly revised -0.4% m/m reading in March.
The largest gains by spending category were seen by miscellaneous retailers (+2.4% m/m), non-store retailers (+1.2% m/m), and general merchandise stores (+0.9% m/m). Spending at health & personal care stores also saw a 0.9% m/m increase after previously slowing in March.
Categories which continued to see losses in April include sporting goods, hobby, book, & music stores (-3.3% m/m), clothing & accessory stores (-0.3% m/m), and food & beverage stores (-0.2% m/m).
Food services & drinking places – the only services category in today’s report – was up by 0.6% m/m in nominal terms but was flat after adjusting for inflation.
Key Implications
The arrival of warmer weather ushered in a moderate rebound in retail spending in April, marking the first increase in three months. However, there were notable downward revisions to 2023Q1, with annualized growth for the first three months of the year now sitting at 4.8% (previously 7%). April’s rebound was underpinned by strength in auto spending, building materials & equipment, and general good products. Looking ahead we expect consumer spending to slow over the course of this year as past rate hikes continue to filter through the economy.
Last week we received the second quarter results of the Federal Reserve’s Senior Loan Officer Opinion Survey which showed that consumer credit continued to tighten but remained relatively accessible despite recent regional bank stress. While the survey does not track the extent to which commercial banks are tightening credit standards, it did show that consumer demand for financing rose in April relative to January. As many consumers have exhausted their pandemic savings, there is an increasing reliance on financing to deal with elevated prices.
 in April, roughly half the consensus forecast calling for an increase of 0.8% m/m. March's reading was revised up, changing last month's decline to -0.7% (previously -1.0%). Most of these revisions were due to the release of the 2021 Annual Retail Trade Survey on April 24th which is used as a benchmark for the monthly data.){kind=link}