Retail Sales Shine Despite Department Store Struggles

Retail sales had their largest increase in 13 months during April, advancing 1.3% month-over-month and beating consensus expectations. The stronger-than-expected headline numbers were broad-based, with auto dealers, apparel stores, furniture outlets and online merchants all seeing a pick-up in sales. March retail sales were also revised upwards. The gains occurred despite traditional brick and mortar retailers struggling mightily, as consumption has shifted online and away from apparel to items such as electronics and to experiences like travel and dining. Nordstrom, Inc. tumbled 13% on Friday after the department store cut its annual earnings and sales growth forecasts. In addition to retail sales numbers, the University of Michigan Consumer Sentiment survey is likely to give retailers confidence that consumers will ratchet up spending in the second quarter. Sentiment surged to a one-year high in May, according to the survey, an indication that households are feeling more upbeat about their inflation-adjusted incomes. If sustained, a shift towards spending and away from savings could mean that the economy has tailwinds to achieve faster growth in the second quarter. A sustained positive trend in earnings and consumption bears close monitoring, as that would have material implications for Fed policy and rates.  

Source: Bloomberg