Higher Retail Sales + Consumer Confidence = Growth

Popular Economics Weekly

The consumer showed a lot of life in May, driving up retail sales 1.2 percent with gains sweeping nearly all components. A leading component in the month was motor vehicle sales which jumped 2.0 percent, excluding which retail sales still rose a very strong 1.0 percent. Another component showing special strength was gasoline sales which got a boost from higher prices.

Still, excluding both of these components, retail sales ex-auto ex-gas gained a very solid 0.7 percent. These results offset weakness in April, when total sales rose only 0.2 percent (upward revised from no change).

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Graph: Econoday

Consumer sentiment is also up, jumping nearly 4 points to 94.6 which is well above expectations for 91.2. The gain is centered in the current conditions component, up 6.0 points to 106.8, which offers an early signal for June-to-May consumer strength. The expectations component shows a smaller but still healthy gain, up 2.6 points to 86.8. The gain here points to confidence in the jobs outlook.

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Graph: Econoday

What does all this mean? Apart from vehicles and gasoline, building materials & garden equipment stores, were up 2.1 percent in what is a good sign for the housing sector. Clothing & accessories stores rose 1.5 percent while non store retailers rose 1.4 percent. Department stores, which sank a steep 2.9 percent in April, rebounded with a 0.8 percent gain.

And, there were solid upward revisions to the two prior months with total sales in April moving from unchanged to plus 0.2 percent and March moving from plus 1.1 percent to 1.5 percent. The May burst and April revision have forecasters raising their second-quarter GDP estimates while the March revision has them raising their first-quarter revision estimates.

This should mean we will see much better GDP growth for the rest of 2015, and maybe into 2016, which is a Presidential election year, let us not forget, as the unemployment rate continues to fall. And Presidential years have historically shown better growth, for some reason.

Harlan Green © 2015

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

About populareconomicsblog

Harlan Green is editor/publisher of PopularEconomics.com, and content provider of 3 weekly columns to various blogs--Popular Economics Weekly and The Huffington Post
This entry was posted in Consumers, Economy, Macro Economics, Weekly Financial News and tagged , , , , . Bookmark the permalink.

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