In June 2011, US headline retail sales rose by a mere 0.1%m/m. The market was expecting a fall of 0.1%m/m. The previous month’s decline was revised from an initial -0.2%m/m to -0.1%m/m.
On an annual basis, US retail sales are up a very respectable 8.1%y/y (in nominal terms), although this is down from 9.1%y/y in February and flattered by the 23.6%y/y increase in gasoline sales.
It is important to note that all the retail sales data is measured in nominal terms.
If motor sales are excluded, retail sales were unchanged in the month (in-line with expectations, but slower than the previous month’s growth of 0.2%m/m).
In addition, if vehicle and gasoline sales are excluded (i.e. core retail sales), retail spending was up 0.2%m/m, below expectations for a rise of 0.4%m/m (see chart attached on core retail activity). On an annual basis, core retail spending recorded a growth rate of 5.7%y/y down from 6.0%y/y in May.
As we mentioned in each of the past two months, it is fascinating to see the continued strong rise in ‘nonstore retailing’ which includes electronic on-line shopping. Nonstore sales rose by a further 0.3%m/m in June and are up 12.3%y/y over the past year. (We provided a detailed analysis of US nonstore retailing last month).
Overall, the US household sector is in a better financial shape now than a year-ago (lower debt/income ratio, lower debt servicing costs, improved savings etc), and consumer income has recorded a meaningful improvement since the Great Recession. However, there is clear evidence that the momentum in the rate of growth of consumer activity has slowed recently – hence the phrase a ‘soft patch' (including vehicle sales – see chart attached). The higher gasoline and food prices are also clearly a concern (although prices have fortunately moderated a little), as is the recent fall-off in consumer confidence and worse than expected jobs data for May and June.
However, this ‘soft-patch’ in consumer activity is not especially alarming, considering that while employment growth has slowed, it has not turned. Equally consumer credit continues to move higher in a controlled manner and savings rates have not jumped noticeably higher. We expect US consumer activity to record a steady but somewhat below average rate of improvement in H2 2011, with the growth in employment dictating the overall pace and vibrancy of consumer spending.
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