Retail Sales: Another Miss, Hints of Substitution

Bottom Line:   Retail sales missed expectations for the second month in a row in May as auto sales fell. On the plus side, the prior two months were revised higher.  Core sales in May were led lower by declines in purchases at building and garden supply stores and general merchandise stores.   Online retailers, the largest core component, slowed by 0.8%.   Eating and drinking places (restaurants and bars) saw a modest 1.8% gain amid more reopenings. Clothing stores, one of the hardest hit in 2020, also saw modestly stronger sales.  Overall, the retail sales were slightly better than the headline miss suggested.  That said, there are signs of substitution away from goods towards services as reopenings continued.  Slower building and garden store sales, for instance, suggest people are spending less on their homes after a year of massive home-focused spending.  Moreover, we should note that retail sales don't capture spending on many services like air travel and hotels.Retail Sales FELL by 1.3% in May,  compared with the market consensus for a decrease of 0.8%.    The April estimate was revised from 0.02% to 0.89%. Retail sales are now 28.1% ABOVE their year-ago level; just a year ago, the year-over-year growth rate was 5.8%. Spending at motor vehicle dealers fell by 3.7%.
                         
Core Retail Sales FELL by -0.7%, compared with the market consensus for an increase 0.4%. The April estimate was revised from -0.79% to -0.05%. Core retail sales are now 26.4% ABOVE their year-ago level; just a year ago, the year-over-year growth rate was 6.8%.In May, gains at grocery stores (+1.0%), clothing stores (+3.0%), health and personal care (+1.8%), gasoline stations, primarily due to high gasoline prices (+0.7%). were more than offset by declines in building materials (-5.9%), general merchandise stores (-3.3%), nonstore retailers (-0.8%), miscellaneous retailers (-5.0%).

Core Retail Sales ex Gasoline FELL by 0.81% and are now 23.8% ABOVE their year-ago level; just a year ago, the year over year growth rate was a moderate 3.9%.