Gene Epstein of Barron’s likes what he sees in the latest round of retail sales data.
This era of diminished expectations can only make us doubly grateful for the occasional blast of upbeat news.
The spring awakening in April’s retail sales didn’t go dormant in May. As reported last Tuesday, not only did May retail sales rise at a healthy rate, but key parts of April’s surge were also revised up. The back-to-back boost augurs well for economic growth in the April-June quarter.
Real consumer spending, which rose at a tepid annualized rate of 1.9% in the first quarter, could grow at an annualized rate of nearly 4% in the current one, its best showing in nearly two years. Even assuming mediocre growth of other components of gross domestic product, headline growth in the second quarter should run at least 2.5%, a respectable pace for this expansion.
Census Bureau data on retail sales resolve an apparent statistical inconsistency: how retail sales could be doing so well at the same time that retailers trading on the stock market are doing so terribly.
“General-merchandise stores,” a census category for which a large subset is “department stores,” have indeed been bleeding retail red ink. Sales by general-merchandise stores fell 0.3% from April to May, and were down 0.7% in May from the same month a year ago. …
… Not surprisingly, a census category uncreatively dubbed “nonstore retailers,” which includes Internet sellers, has been marching in the opposite direction. In May of last year, nonstore retailers did 73% as much business as the vast general-merchandise bricks-and-mortar establishments ($41.1 billion versus $56.3 billion); by May of this year, their share vaulted to 82.4% ($46.1 billion versus $55.9 billion). Their $5 billion jump in sales from a year ago (up 12.2%) more than swamped the $400 million dip in general-merchandise store sales.
