Posted on May - 14 - 2010
U.S. April retail sales continue along comeback trail
The U.S. Census Bureau reported Friday that retail sales climbed 0.4% in April versus March and 8.8% when compared with their year-ago April level. The year-over-year increase is very strong.
Whenever current dollar retail sales are +5.0% or higher on a year-over-year basis, and inflation is at a reasonable level of around 2.0%, this is good news for the overall economy. It means that “real” (inflation-adjusted) consumer spending is proceeding at about a +3.0% pace, laying down a solid base for gross domestic product (GDP). In the U.S., consumer spending is 70% of GDP.
The latest all-items CPI increase in the U.S. was +2.3%.
U.S. retail sales have recovered two-thirds of the decline they experienced in 2008. They now stand less than 5% below their pre-recession peak achieved in November 2007. The rise in retail sales has been quite steady since spring 2009.
U.S. consumers are clearly back in the game. The fact that the Federal Reserve has kept interest rates at record lows for an extended period of time has been a big contributing factor.
Some analysts have been worrying that the recent strength in consumer spending might be unsustainable. Purchases have often been financed out of savings as opposed to higher incomes. Ongoing consumer spending momentum needs an improvement in jobs availability and income levels.
Some of these fears were put to rest with the April labor market report. The 290,000 job gain in the latest period was three times the average month-to-month gain over the past 20 years.
This kind of new jobs strength needs to be maintained, however, to make serious inroads into the 8.0 million shortfall that still exists versus the national jobs level before the recession.
The largest gains in U.S. retail sales in April, year-over year, came in the following sectors: motor vehicles and parts +15.1%; building material and garden equipment +12.1%; non-store retailers (i.e. sales over the Internet) +12.9%; and gasoline stations +30.1%.
The impressive gain in gasoline station sales came largely by way of price increases. The price of gasoline within the latest Consumer Price Index (CPI) moved up 40% year over year.
The advance estimate for U.S. GDP growth in first-quarter 2010 was +3.2%. If retail sales continue at their current rapid pace for the remainder of the year, 2010 GDP growth will exceed most expectations.
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