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Economy in Brief

U.S. Retail Spending Remains Firm; Core Sales Are Strongest Since 2006
by Tom Moeller May 14, 2010

Improvement in the job market definitely has translated into more business for U.S. retailers. Retail sales rose 0.4% last month. The gain was twice the Consensus expectation and the March increase was revised up to 2.1% from 1.6% initially reported.Year-to-year, the 8.8% increase in sales was the strongest since 2005 although sales remained 3.6% below the pre-recession peak.

Nonauto sales also posted an expected 0.4% increase in April following two months of 1.2% gains. The March rise was double the advance indication. Bloating this increase was a 6.9% surge (12.1% y/y) in sales of building materials & garden equipment.

To the downside in April was "core" discretionary spending, though earlier gains are still improved. Apparel store sales fell 1.0% (+5.7% y/y), although they rose at a 15.3% rate during the last three months. Sales at furniture, home furnishings & electronics stores also fell by 0.8%, but the three-month change actually rose by 9.3% after two years of decline. Furniture sales alone declined 1.2% following two months of 2.0%+ increases. Sales of electronics & appliances fell for the second consecutive month. However, as a result of a strong beginning to the year, three-month sales increased at a 5.5% annual rate. Finally, sales at general merchandise stores slipped 0.4% (+3.9% y/y) but they rose at a 5.7% rate during the last three months.

Despite the decline in unit sales, motor vehicle sales rose 0.5% last month and at a 19.5% rate during the last three. Finally, sales at gasoline service stations rose just 0.5% (30.1% y/y) despite a 2.8% rise (39.0% y/y) in April gas prices. Are higher prices discouraging usage?

Earlier strength in internet & catalogue sales continued to abate. Sales ticked up just 0.2% and the three-month annualized rate of gain backed off further to 3.0% down from 25.3% growth in January.

  April March February April y/y 2009 2008 2007
Total Retail Sales & Food Services (%) 0.4 2.1 0.6 8.8 -6.0 -0.8 3.3
Excluding Autos 0.4 1.2 1.2 7.6 -4.8 2.4 3.9
    Non-Auto Less Gasoline 0.4 1.3 1.3 5.1 -1.9 1.6 3.6
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