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May’s Retail Sales Data Suggests US Economy Still on Solid Footing

An 11.4 percent year-over-year growth in online and other non-store sales, combined with gains in most other retail sectors, helped give the May retail sales report a healthy boost, which in turn suggests a resilient consumer who is confident about the economy.

The monthly retail sales report from the U.S. Census Bureau excludes sales from automobile dealers, gasoline stations and restaurants. The May data report saw retail sales up 0.5 percent, following a revision in April’s data to up 0.3 percent. When compared to last year, retail sales in May, excluding food, rose 3.1 percent.

In general, the May report shows year-over-year gains in most retail categories: up 11.4 percent for online and non-store sales; up 3.3 percent for general merchandise stores. although department stores were down 4.6 percent; up 3.4 percent for health and personal care retailers and up 0.6 percent for furniture and home furnishings stores. Apparel and accessories stores lost ground, down 2.3 percent in May. Also down at 4.2 percent were sporting goods retailers and hobby, musical instrument and book stores.

Moody’s Analytics economist Scott Hoyt noted that U.S. retail sales were stronger than expected, less so for the 0.5 percent growth in May from April and more so for the “large upward revision to April growth.” According to the U.S. Census Bureau, the March 2019 to April 2019 percent change was revised to up 0.3 percent from down 0.2 percent.

Hoyt also noted that the year-ago growth leader was the e-commerce sector, which was the “only major segment posting double-digit gains.” He said the biggest declines were at department stores, sporting goods and hobby stores, as well as apparel retailers.

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But the Moody’s economist pointed out that while U.S. retail sales growth has been inconsistent, with sales declining in five of the past 10 months, at least the upward revision to April is now indicating modest year-over-year growth.

Mickey Chadha, vice president and credit analyst at Moody’s Investors Service, a credit ratings firm, said the healthy 0.5 percent increase in May over the revised 0.3 percent gain in April “demonstrates that consumer spending is still on the uptick and the fear of a slowdown in consumer confidence is premature.”

Chadha is predicting retail sales growth for 2019 in the 4.5 percent range, led by e-tailers such as Amazon and off-price retailers such as TJX Cos. Inc. “Continued strong macroeconomic trends are also expected to remain in place with low unemployment and wage growth continuing to bolster retail sales,” she concluded.

Tim Quinlan, senior economist at Wells Fargo Securities, described the May retail sales report as “solid” and said it suggests “consumer spending is on pace to have a solid second-quarter gain.” He pegs second-quarter consumption growth at 2.9 percent.