Retail sales fell 0.2% in May, the first decline since June 2010 and roughly in line with expectations, according to a survey by Bloomberg.
On the surface, the drop isn’t surprising given the recent slowdown in economic activity but if we dig into the numbers, consumers are not signaling a summer of gloom for the economy. Discontent, maybe but not gloom.
Ex-autos, sales grew by a modest 0.3%, almost matching expectations given a small downward revision in April.
And removing a 0.3% rise in gasoline stations sales, so-called core-sales, which helps to eliminate the swings in gas prices and the volatile auto sector, also increased 0.3%.
Overall, May came in mostly in line with expectations, but more importantly, there were not any downward surprises that would indicated economic activity was about to stall or contract. And that has stocks up sharply in early trading!
Given the latest upward move in the ISM Service Index and the relatively stable level of jobless claims – elevated, but stable – the economy continues to plod ahead.
The latest report should diminish the recent chatter that we're headed into a new recession.
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