Retail Sales: Acceleration in 2nd Quarter

Bottom Line: Retail sales were sharply stronger than expected in May. Core Sales ex-gasoline stations and ex-building materials during April and May were moderately above their Q1 averages, suggesting that real consumer spending will add to accelerating Q2 GDP -- consensus is now 3.3%, while Atlanta Fed's GDP Now is 4.55%, with this report suggesting growth closer to the Atlanta Fed model for now. While the overall report was strong, there were pockets of weakness with a drop in furniture and sporting goods sales and decelerating growth in non-store retailers - these bear watching going forward to confirm the acceleration in core sales into the summer. Retail Sales ROSE by 0.8% in May, compared with the market consensus for an increase of 0.3%. The April estimate was revised from 0.30% to 0.36%. Retail sales are now 5.9% ABOVE their year ago level; just a year ago, the year over year growth rate was 4.0%. Spending at motor vehicle dealers climbed by 0.5%. Core Retail Sales ROSE by 0.9%, compared with the market consensus for an increase 0.5%. The April estimate was revised from 0.35% to 0.40%. Core retail sales are now 6.4% ABOVE their year ago level; just a year ago, the year over year growth rate was 3.6%. In May, gains at gasoline stations, primarily due to:

• high gasoline prices (+2.0%),
• building materials (+2.4%),
• general merchandise stores (+1.2%), and
• clothing stores (+1.3%).

This was partially offset by declines in:

• furniture & home furnishing (-2.4%), and
• sporting goods, hobbies, etc. (-1.1%).

Core Retail Sales ex Gasoline ROSE by 0.77% and are now 5.1% ABOVE their year ago level; just a year ago, the year over year growth rate was a moderate 3.5%