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WEAK RETAIL SALES GIVE LITTLE HOPE FOR Q2 GROWTH

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WEAK RETAIL SALES GIVE LITTLE HOPE FOR Q2 GROWTH

May 14 2015, 10.30am GMT

STOCK.com

In April, retail sales in the U.S. were flat as many households cut back on buying automobiles and other big-ticket items; another sign of struggling economic growth in the first quarter.

The Commerce Department released a report on Tuesday that indicated weaker-than-expected retail sales and on Wednesday, additional data showed a tenth straight month drop in April of import prices, suggesting very little urgency for a rate hike from the Federal Reserve.

Despite the revision of retail sales for March showing a 1.1% increase compared to the previous 0.9% rise, it was not enough to deter from the negative undertone of the report. Economists had predicted sales in April to increase 0.2%.

Retail sales excluding gasoline, automobiles, building materials & food services were unchanged after being revised up, increasing 0.5% in March.

The core retail sales more closely corresponds with consumer spending of GDP (gross domestic product). For April, economists had predicted core retail sales increasing 0.5% compared to 0.4% up in March.

Despite the boost that households received with lower gasoline prices, retail sales still trended weaker. This indicates that consumers have saved a lot of the money from the lower gasoline prices.

With the retail sales data, coupled with the employment & manufacturing reports, this suggests that although the economy was regaining stability at the beginning of the 2nd quarter, it is lacking enough intensity to convince the Federal Reserve to soon tighten the monetary policy.

Macy’s Inc. (NYSE: M), one of the biggest department store retailers in the U.S., further underscored the weaker sales trajectory when it reported a 13.8% decrease in its 1st quarter net income, blaming the cold weather, the stronger dollar (USD) and the port disruptions.

Macy’s, which operates over 850 stores across the U.S., said that tourists spending has dropped sharply at Macy’s & Bloomingdale’s stores. It further said that 2nd quarter earnings are expected to drop short of results compared with the same period last year.

The following couple of days will see other major retailers like Nordstrom (NYSE: JWN), JC Penney (NYSE: JCP) and Kohl’s (NYSE: KSS) report their results after Wednesday’s close of trade.

 

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