Monday, June 14, 2010


Dave Rosenberg, Chief Economist & Strategist at Gluskin Sheff, dissects the retail sales data:

U.S. retail sales came in far weaker than expected in May with a 1.2% MoM decline, the worst print since last September. As we had warned, much of the pickup in unit auto sales last month that got everyone excited was in fleet sales (government buying) so we actually saw a hefty 1.7% decline in motor vehicle receipts (could have been some deflation as well).

Apparel sales is getting clobbered — mirroring what we saw in the recent CPI numbers, apparel sales were down 1.3% MoM on top of a 0.7% drop the month before. After two huge stimulus-led gains, home improvement posted a record 9.3% plunge. Department store sales sagged 1.8% for the second month in a row. Restaurant activity was basically flat.

As bad as the data was, the "core" number (retail sales excluding autos, building supplies and gasoline station sales) that goes into the consumer spending part of the GDP data did manage to eke out a 0.1% MoM gain — soft, but hardly a disaster. There were a few bright spots that held this metric up, including furniture/appliances (+0.8% MoM); food and pharmacies were both up 0.3% too — steady-as-she-goes sectors.

But overall, it was clearly a disappointment to see that in a month when households spent 3.3% less filling up their cars and posted a nice (though less than expected) 431k gain in employment that the rest of the retail spending pie was trimmed 1%. Maybe frugality is back in, and the savings rate is heading back up. When the economy is not in recession, declines in gas station receipts coincide with gains in ex-gas retail sales more than 80% of the time. Maybe something funky is starting to go down here.