United States: Surprisingly Strong Retail Sales, but Somewhat Disappointing Industrial Production
- Retail sales rose 0.3% in May after climbing 0.4% in April.
- Motor vehicle sales jumped 1.4% after advancing 0.4% the month before. Gas station receipts fell 2.6%. Excluding motor vehicles and gasoline, sales were up 0.4% after rising 0.5% in April.
- Aside from the automotive sector, the largest increase came from building material stores (+2.2%). Most other retailers posted gains of 0.2% to 0.4% on the month. But clothing stores were flat (0.0%), and miscellaneous store retailers were down 1.0%.
- Industrial production declined 0.2% in May after rising 0.5% in April. Manufacturing output edged up 0.1%, while mining fell 0.4%. Energy production was down 1.8% for the second straight month.
May's retail sales growth came as a surprise. Sales at motor vehicle dealers were up despite data earlier in the month showing a 6.5% drop in new car sales. The 0.4% gain in sales excluding motor vehicles and gasoline was also higher than expected based on preliminary card transaction data. The US consumer remains resilient in the face of high interest rates and low confidence. Adjusted for price changes, sales were up 0.5% in May after eking out a 0.1% gain in April.
The decline in industrial production was also surprising. But it was largely the result of another drop in energy production due to milder weather. Meanwhile the advance in manufacturing activity came in close to expectations. After posting a strong 9.8% monthly gain in April, the automotive sector was up again in May, albeit a more modest 0.2%. There was also solid growth in aerospace (+2.5%), electrical equipment (+1.4%) and petroleum and coal products (+1.7%). It remains to be seen whether the weakness in the ISM Manufacturing index will show up in the manufacturing data over the coming months.
Sales growth came in better than expected, while growth in industrial production was a bit weaker. All in all, the economy seems to be expanding at a moderate pace, as the Federal Reserve indicated yesterday. This should set the stage for another rate hike in July at the very least.
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