Friday, June 11, 2010

Retail Sales in May 2010

Advance estimates of U.S. retail and food services sales for May, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, decreased by 1.2 percent  from the previous month, but increased by 6.9 percent from May 2009. Total sales for the March through May 2010 period were up 8.1 percent  from the same period a year ago. The figure of April 2010  was revised from an increase of 0.4 percent to 0.6 percent.

Excluding auto and parts, retail sales in May dropped by 1.1 percent from April but it is still 6.2 percent higher than the same period last year.

So, the question here is, " Have consumers finally run out of steam after 7 months of increased retail spending together with fiscal stimuli? "

By looking at each individual category in retail sales, categories that dropped in May from April include auto and parts, building materials and garden equipment and supplies, gasoline stations, clothing and general merchandise (including departmental stores). Among those that increased were furniture, electronics and appliances, food and beverages, healthcare and personal care, non-store retailers.

Building materials and garden equipment and supplies experienced a very sharp drop (9%), that alone could have led to close to 0.6% decline in total retail sales as the category carries about 0.6% of the total. Together with an increase in sales of furniture and electronics/appliances, it seemed to me retail sales in May was disapproportionately affected by homebuilders rushing to build houses to meet the demand of first time home buyer as home buyer credit was drawing to a close at April 30. This was further supported by the fact that this category had a big jumped of 8.4% in April from March following the previous big jump of 7.8% in March from February.

Furthermore, consumer confidence index of June compiled by University of Michigan showed the highest reading of 75.5 in two years. Although consumer confidence index is known to be fickle, it is one of the key leading indicators of future consumer behavior. I guess we will have to wait till June data to confirm whether consumer spending has really come to a halt.

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