With a lack of additional stimulus checks in May, analysts expected retail sales to fall 0.8% MoM, however today's data was much worse and showed a 1.3% MoM decline in May reversing from a 0.9% rise in April. It is the first decline since February with spending rotating back to services from goods, as vaccinations allow Americans to travel and as fiscal support faded after a cash injection in March. Retail sales excluding autos dropped 0.7% MoM in May, compared to market expectations of a 0.2% rise. Today's reading was largely in line with Bofa forecasts, whose retail model is based on credit card spending. Bofa analysts expected a decline in overall sales at 1.4% MoM and sales excluding cars at 0.6% MoM.
Retail sales recorded a pronounced dip in May. Source: Bloomberg
Among individual categories sharpest decreases were seen among building materials and garden equipment (-5.9%), autos (-3.9%), and electronics stores (-3.4%). Other declines were also seen at miscellaneous store retailers (-5%), general merchandise stores (-3.3%), furniture (-2.1%) and sporting goods, hobby, musical instrument, & book stores (-0.8%). In contrast, increases were seen at clothing (3%), health and personal care stores (1.8%), food services and drinking places (1.8%), food and beverages stores (1%) and gasoline stations (0.7%).
Building Materials and Motor Vehicles saw the biggest drop. Source: U.S. Census Bureau
Meanwhile retail inventories (supply) has reached a record low relative to retail sales (demand). Source: Bloomberg via ZeroHedge
Also, annual producer inflation climbed to 13-year highs, showing inflationary pressures continue to loom while industrial production grew at a slightly faster-than-expected 0.8%.However FED will most likely use today's weak retail sales figures as one of the reasons for maintaining its current monetary policy during tomorrow’s meeting. Therefore investors which are waiting for any updates on the tapering timeline may be disappointed.
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