In June 2012, US headline retail sales fell by a disappointing 0.5%m/m. This was well below market expectations, which was for a rise of 0.2%m/m. The June decline in sales is the third consecutive monthly fall in US retail spending. On an annual basis, US retail sales were up 3.8%y/y (in nominal terms), but this is well below the recent peak annual growth rate of 9.2%y/y in June 2011.
Importantly, all US retail sales data is measured in nominal terms. This means that changes in price (especially gasoline prices) can have a significant impact on both the monthly and annual rates of change in retail activity.
If motor vehicle sales are excluded, retail sales fell by 0.4%m/m in June. This was well below expectations, which was for sales (excluding motor vehicles) to remain unchanged. Excluding both vehicle and gasoline sales, retail spending declined by 0.2%m/m. The market was expecting this category of spending to rise by 0.2%m/m. Overall, no matter how the data is adjusted, retail activity was weak in June, and has been under pressure for the past three months.
One surprise in the June data was that vehicle sales were recorded as a decline of 0.6%m/m, whereas the vehicle data reported directly from the industry recorded an increase of 2.4%m/m in June. Crucially, the industry data is used to calculate the contribution of vehicle sales to GDP growth, and not the Department of Commerce retail data.
Gasoline sales recorded a decline of 1.8%m/m in June. This largely reflects the recent reduction in the price of gasoline.
There has been a significant turn-around in US consumer credit relative to the extensive de-leveraging that prevailed during the two year period from late 2008 to late 2010. This has provided some uplift to retail activity given the very sluggish growth in household income, but has not been sufficient to reverse the slowing trend.
Overall, the recovery in US consumer activity has clearly stalled. Even adding household spending on services (which is more consistent and stable than spending on retail goods) the growth in consumer activity is likely to reflect a noticeable slowdown in Q2 2012 relative to Q1 2012 - but not a recession. The Q2 2012 estimate of US GDP is scheduled for release at the end of July and could be down at around 0.8%q/q to 1.3%q/q (annualised). This compares with a disappointing 1.9%q/q (annaulised) in Q1 2012.
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