Ed Kashmarek - The Everyday Economist
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Retail Sales Decline in May as Gasoline Station Sales Plunge

6/15/2017

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Retail sales fell 0.3% in May from the prior month, missing the consensus forecast of a 0.1% increase, following a 0.4% increase in April. Sales excluding autos and gas also missed expectations, coming in unchanged versus the 0.3% forecast. On a year-over-year basis, sales were up 3.8%, down noticeably from the recent peak growth rate of 5.6% reached in January.
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This was a very weak report as the only real strength was seen in non-store sales, which increased by $405 million, or 0.8%, and led the way on both a dollar and percent growth basis. The next biggest increase by dollar value was a $75 million, or 0.3%, increase in clothing. Food and beverage stores saw sales rise by $47 million, or 0.1%. Furniture sales rose by $35 million, or 0.4%, which was the second best percentage increase. In all, only six of sixteen categories saw higher sales compared to April. The biggest decline on a dollar basis was seen in gasoline station sales, which plunged by $923 million, or 2.4%, as both prices and gallons purchased dropped. Electronics and appliances sales fell by $237 million, or 2.8%, following a very strong April. Vehicles and parts sales, an important economic driver, fell by $224 million, or 0.2%, as the downturn in the vehicle market resumed after an uptick in April. The miscellaneous category also saw lower sales, falling by $141 million, or 1.3%.

​Sales were higher on a year-over-year basis, led by a $4.8 billion, or 10.2%, increase in non-store sales. Vehicles and  parts were a close second with a $3.5 billion, or 3.7%, rise in sales, followed by a $3.0 billion, or 10.8%, increase in building and garden supplies sales . Thus, non-store sales were a major driver in sales on both a month-ago and year-ago basis, but vehicles and parts, although strong year-over-year, have been weak on a monthly basis recently. The largest dollar decline in sales was seen in department stores, where sales were down $487 million, or 3.7%. However, the biggest percentage decline was in sports and hobby stores sales, down 4.7% from a year ago.
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If we take out the impact of gasoline sales, which are not really an indication of stronger or weaker economic growth but rather due to changing gas prices, ex-gas retail sales were up only 3.6% from a year ago in May. If we also adjust for inflation, we see that real ex-gas retail sales were up just 1.7% in May, and the growth rate has been trending down.

​Despite this weak report, along with other weak May data, the Federal Reserve raised interest rates. It may be a costly move.
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