Retail Sales are Unexpectedly Flat in April

April’s retail sales showed no growth in April, remaining flat at $705.2 billion, according to advance estimates from the Census Bureau. This unexpected stagnation marks the second-worst month in the past six months and fell short of economists’ expectations of a 0.4% increase.

By the numbers:

• Monthly change: U.S. retail and food services sales were unchanged from March, significantly below the anticipated 0.4% rise.
• Year-over-year: Sales are up 3.0% compared to April 2023, down from a 3.8% increase in March, marking the first decline in three months.

Sector performance:

• Declines:
  • Online retailers saw the largest drop, with sales down 1.2%.
  • Sporting goods stores experienced a 0.9% decline.
  • Auto parts stores fell by 0.8%.
• Gains:
  • Gas stations, buoyed by rising prices, saw a 3.1% increase in sales.
  • Clothing stores’ sales rose by 1.6%.
  • Electronics stores reported a 1.5% increase.

Context:

• Despite the flat overall sales, inflation-adjusted retail sales actually declined, with the latest Consumer Price Index (CPI) report showing prices up by 0.3% in April.
• Rising credit card delinquencies reported earlier this week suggest that consumers are starting to pull back on spending in response to higher prices, indicating potential economic stress.

What they’re saying:

• Charlie Bilello, Chief Market Strategist Creative Planning, noted “US Retail Sales increased 2.7% over the last year but after adjusting for higher prices they fell 0.7%. Both of these numbers are well below the historical averages of +4.7% nominal and +2.0% real.”

The big picture:

• The lack of growth in retail sales, combined with inflation and rising credit card delinquencies, points to a cautious consumer market.
• These trends could influence future economic policies and retail strategies as businesses and policymakers seek to navigate the uncertain economic landscape.

Mortgage Rate Impact: Retail sales seem to have trumped a mixed CPI report as bond yields fell almost 10 bips after the release of these reports.