Fleet Management

Economic Watch: Retail Sales Post Another Solid Gain

June 14, 2016

By Evan Lockridge

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U.S. retail sales rose a stronger-than-expected 0.5% in May from the month before, building on a strong April gain, which could lead to better expectations of overall second quarter economic growth.

The new Commerce Department report beat Wall Street expectations of a 0.3% increase for May and follows an unrevised 1.3% jump in April, for the second straight monthly gain. Compared to May 2015, retail sales improved 2.5%.

Retail sales are important for trucking for several reasons. They drive about two-thirds of all U.S. economic activity, and retail freight spends at least part of its life on trucks before making it to store shelves.

Excluding the auto sector, retail sales rose 0.4%. Retail sales minus autos, gas stations, and building material stores also posted a 0.4% increase, which builds on a upwardly revised 1% jump in April, up from a first reported 0.9% increase.

Strong increases over the last two months have left overall sales up an annualized 5.7% to-date in the second quarter. “Core sales,” which feed directly into the government quarterly real consumer spending estimates, are up a similar 5.9% second quarter to-date, according to RBC Economics.

“The gain in retail sales in May was unexpectedly solid and built on an outsized April increase to leave upside risk to our forecast for a 3.2% annualized gain in Q2 real personal consumption expenditures, up from 1.9% in the first quarter, with a 3.5% rate of increase now looking more likely,” said RBC Senior Economist Nathan Janzen.

He said the weak 38,000 job gain in May reported last week could point to risk of slower economic growth going forward. However, the slower employment growth came from higher wages, leaving aggregate labor income still rising at a solid rate.

“We expect part of the downward employment surprise in the month simply reflected monthly volatility,” Janzen said. “Part was also likely indicative of a slower underlying trend, but reflecting labor supply rather than demand factors that have offsetting upward implications for wages. We assume, on balance, somewhat slower employment gains going forward than the 200,000 and over increases we have become used to in recent years, but alongside continued wage growth that will leave a still supportive backdrop for household incomes and spending.”

With two straight months of healthy retail sales, an increasing number of analysts are revising upward their estimates for second quarter gross domestic product growth, which posted just an 0.8% annual improvement in the first quarter, according to the most recent government numbers.

Comments

  1. 1. RICARDO ENCARNACION [ June 15, 2016 @ 05:02AM ]

    ARE THEY SELLING MORE OR JUST SAVING MORE?
    FULL LOADS TRUCKING COMPANY ARE GOING DOWN THE DRAIN.

 

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