Consumers prove resilient in May

Consumers opened their wallets in May as retail sales rose 0.3%, outpacing expectations for a 0.1% drop.  This follows a 0.4% increase in April and is a testament to a resilient consumer despite myriad challenges facing the U.S. economy. 

An upside surprise in the report was sales of motor vehicles and parts, which jumped by 1.4%.  Earlier in the month, sales of new vehicles were reported to be down in May and typically, unit sales and retail sales tend to move in the same direction.  The mix between fleet sales and purchases by consumers could alter this dynamic and the May increase suggests there was less selling to fleets and more purchases by consumers at a higher price. 

Another category that showed a healthy increase was building materials store sales, up 2.2%, which follows a 0.5% rise in April.  As my colleague Yelena Maleyev recently pointed out, there are pockets of optimism springing in the housing market, sending homeowners to home improvement stores.

Big box discounters fared better than department stores, which is a bit of a surprise given recent earnings reports that some in the former category are holding too much inventory. 

E-commerce sales slowed after a spurt in April but continued with a solid monthly gain. People are still stepping out and going to bars and restaurants, but the spending has slowed from the red-hot pace at the start of the year.

The only soft performers in May were gasoline station sales, -2.6%, which were in the black after adjusting for the sharp drop in prices at the gas pump in May. That suggests that people took to the roads as well as to the air during the blockbuster Memorial Day weekend.

Sales at apparel stores and health and personal care stores were flat. They actually contracted after adjusting for inflation. Apparel costs were up in the CPI data, which suggests consumers may be seeking more discounts.

Core retail sales, otherwise known as control group sales which feed into consumer spending for GDP, rose 0.2% in May after +0.6% in April. The core feeds directly into the GDP calculation and suggests consumers slowed down but did not collapse after a surge in spending at the start of the year.