United States: Slower than Expected Retail Sales Growth in April, but Manufacturing Surprises on the Upside
- Retail sales rose 0.4% in April following 0.7% declines in both February and March.
- Motor vehicle sales also increased 0.4% following a 1.4% drop in March. Gas station receipts fell 0.8%. Excluding motor vehicles and gasoline, sales were up 0.6% after falling 0.5% in March.
- Outside the automotive sector, the strongest gains were in nonstore retailers (+2.4%), general merchandise stores (+0.9%), pharmacies and drug stores (+0.9%) and food services and drinking places (+0.6%). The biggest declines were seen in leisure goods stores (-3.3%) and department stores (-1.1%).
- Industrial production rose 0.5% in April after two flat months (0.0%). Manufacturing rose 1.0%, and mining was up 0.6%. Energy production dropped by 3.1% after spiking 8.4% in March.
Despite rising for the first time since January, retail sales disappointed. Advance indicators such as the number of new vehicles sold (+7.2%), higher gasoline prices (+3.0%), which tend to increase gasoline station receipts, and preliminary card transaction data all pointed to a much better print. That said, a 0.6% increase in sales excluding motor vehicles and gasoline isn't to be sneezed at, and is a fairly good start to the second quarter for real consumer spending. However, sales remain below both January's recent peak and the first-quarter average. We'll have to keep an eye on the data in the coming months to see whether previous rate hikes further curb household spending.
Industrial production rose more than expected. Energy production didn't fall as much as forecast, while the manufacturing sector was driven by the highest monthly growth in motor vehicle assemblies (+13.7%) since October 2021. Excluding this sector, the picture is a bit less promising, with industrial production flat and manufacturing up just 0.4%. Moreover, the weak ISM index and sluggish global trade aren't pointing to a lasting recovery in the US manufacturing sector.
Manufacturing and retail sales began the second quarter of 2023 on the right foot. That said, these prints aren't as critical as the strong labour market or sticky inflation and are unlikely to be a game-changer for Fed officials.
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