The winter chill is over and the warmer spring weather has coincided with a sharp increase in retail sales in May for the third straight month.
This would seem to suggest that consumers spend more in warmer weather but there are also underlying economic factors fuelling consumer spending.
The Commerce Department released data on Thursday revealing that retail sales for May increased by 1.2% over the previous month to a seasonally adjusted figure of $444.9 billion. Retail sales figures for March and April had been upwardly revised to show that the growth spurt in retail sales started with the onset of warmer weather.
The increase was fractionally lower than the expectations of several economists who had forecast a growth in sales of 1.1% for the period. BNP Paribas economist, Laura Rosner, said however, “We continue to expect robust consumption growth for the remainder of the year”, a sentiment shared by many other economists.
Retail sales, which account for approximately 66% of U.S. economic output, are an important yardstick used by economists in preparing forecasts of future economic activity.
Vehicle and auto parts sales led the way in increased retail sales with an increase of 2% over the previous month. Car manufacturers had their best month in terms of units sold since 2001 with gas guzzling SUV’s leading the way as a result of lower fuel prices. Truck sales also showed a healthy increase as an indication of renewed industrial growth and confidence going forward. Although generally lower fuel prices had stimulated vehicle sales, a small increase in the pump price of gasoline had seen fuel sales increase by 3.7% during May.
Removing vehicle and vehicle related sales, such as auto parts and fuel, from the May retail sales figure; it still reveals a robust growth of 0.7% over the previous month. The increase of 2.1% in sales at home improvement centers such as Lowe’s (LOW, -.0.19%) and Home Depot (HD, +0.28%) suggests that the improved employment and wage figures are translating into higher spending. This is also reflected in an increase of 1.5% in wearing apparel sales and an upward movement of 1.4% in internet sales.
The only market sector that has posted figures showing a decline in sales were those in the health and personal care related stores such as CVS (CVS, +0.49%) and Rite Aid (RAD, +3.70%). The other sector to show very small growth was surprisingly enough the restaurant sector where sales had previously been quite buoyant.
Employment figures for the retail sales industry reveal confidence going forward with an increase of 135,000 workers during the first five months of 2015. This figure is substantially higher than the seasonally adjusted figure for the same period in the previous year. Federal Reserve officials are obviously watching sales, employment and related figures closely with a view to increasing interest rates later in the year.