The Commerce Department, on April 15, reported that retail sales for April, 2024, were virtually unchanged from March.
They were up 3% from April 2023.
Michael Pearce, Deputy Chief US Economist, at Oxford Economics offers this analysis.
The fact that retail sales growth stalled in May is not a major concern since it mostly reflects a drop back in nonstore sales following the end of a one-off Amazon sales event that boosted April sales. We estimate real consumption growth edged back in May, which together with downward revisions to previous months, pushed our tracking estimate of real consumption growth in Q2 down to 2% annualized, suggesting a small downside risk to our baseline forecast for growth of 2.4% in Q2.
The downshift in spending growth in April was a touch worse than expected but was due entirely to a decline in nonstore sales after a very strong showing in March, which we think reflects a combination of a new sales event at Amazon and the earlier timing of Easter this year. Spending at bricks and mortar retailers advanced at the same solid pace it did in March.
Using the various source data for consumption, we estimate that personal spending rose by 0.2% in April, which would translate to a 0.1% decline adjusted for inflation. Together with the small downward revisions to control group sales for February and March, we think that means real consumption is on track for growth of 2% annualized in Q2, slightly slower than the 2.5% gain in Q1, and our baseline forecast of 2.4%, though it is still early days.
Consumer spending is slowing as elevated interest rates weigh on rate-sensitive spending and as the labor market cools. With aggregate balance sheets solid and the labor market cooling rather than collapsing, we expect that slowdown will remain gradual. The resilience of the economy frees the Fed to focus on the incoming inflation data to guide its rate decisions, which we think will improve over the coming months and prompt the Fed to begin gradually easing rates beginning in September.
