SpendingPulse: Spending in the US Gathering MomentumKamalesh Rao |
This morning we released the SpendingPulse April total retail sales results. Spending in the US continued to gather momentum in April, as retail sales ex autos grew by 8.8% year-to-year. Last month’s growth was well above the 7.1% year-to-year growth of last quarter, and is the best year-to-year growth rate from retail spending (ex autos) since May of 2006.
Some of this momentum can be attributed to the ongoing increase in gasoline prices, which has helped bolster gasoline spending growth rates. And since gasoline can comprise 12-15% of total retail sales in the US, these increases can have a sizeable impact on overall retail sales.
But the question many economic observers are asking is, is the sharp increase in total retail sales coming only from the increase in gasoline prices? Looking at retail sales ex gas (and ex autos), the picture of spending still remains fairly impressive. Retail sales ex gas ex autos were up by 6.7% year-to-year in April, a significant increase over the average 5.7% year-to-year growth rate of last quarter.
The latest numbers are yet another gain in the rally in retail spending that had begun, by most measures, in November of last year. While things started to improve as early as August in the back to school season, November was really the defining period when the momentum really hold. The gains in spending over the last six months have put a good deal of distance between current sales and the downturn of 2008. As of last month, retail spending is close to 6% above its pre-recession peak (retail sales generally peaked in August of 2008), a fairly decent sign that the recovery in retail sales is well underway.
And yet, it best to approach the latest momentum in sales with some caution. For one thing, it is hard to point to exactly what is sustaining retail sales these days since there are no early year-to-year comparisons helping drive headline numbers. This fact, combined with the general state of the labor market generally mixed economic environment makes it hard to draw real parallels between now and late 2005/2006. All of this suggests that the current rate of retail expansion could be vulnerable especially given the weight of higher fuel costs on discretionary spending growth. This uncertainty, could of course, be offset by a additional momentum in the labor market, such as we have seen these past couple of months.
Also appears on The Heart of Commerce Blog.