Result: Surprising - good growth in Q2.

Retail sales fell by 0.2% in April the first month of the second quarter… yet sales in Q2 are up nicely so far. How can that be? The reason is that for GDP we look at what happens in quarter on average. And in Q1 sales got stronger as the quarter went on. So, in March, the month of the quarter sales were well above the Q1 average. The small drop in sales in April therefore leaves sales growing in Q2. The growth rate for nominal sales in the quarter so far is 3.7% for overall sales. Taking out vehicle sales raises that to 5.5%. With vehicle and gasoline station sales removed the rise is 2.7%. While the 2.7% figure seems weak with gas station sales out of the total, most of the energy is removed so that comes much closer to being a real sales figure.On balance Q2 is off to a reasonably good start. The early Easter packed sales into March by sucking them out of April. But on balance we are still in good shape in Q2. Trends are moderately lower, but only moderately (see graph).

Clothing sales were weak in the month and are weak over the past three months with a three-month growth rate of -6.1% annualized. General merchandise is weak in that same way. But nondurables excluding gasoline sales are up at a 5.5% pace over three months and remain at a very steady pace (see table below). Durables spending was weak in the quarter on weakness in vehicle sales (-1%) and weakness in building materials (-2.3%) while furniture and electronics sales were up (1%) over three months. Durables sales are dropping, but only at a -0.6% annual rate. Year/year durables sales are flat due to the on-again off-again nature of vehicle sales and ongoing weakness in building materials. The weakness in building materials shows no sign of letting up.