Retail sales were ugly this morning. As I often say here, this recovery lies almost entirely in the hands of the consumer. This doesn’t bode well. Econoday reports:
Retail sales in April were surprisingly negative, dashing market expectations significantly for two months in a row. Overall retail sales fell another 0.4 percent in April after dropping 1.3 percent the month before. The April decrease was sharply below the market forecast for a 0.1 percent increase. Excluding motor vehicles, retail sales posted a 0.5 percent decline, after a 1.2 percent plunge in March. The fall in ex-auto sales was far worse than the consensus expectation for a 0.3 percent increase.
Declines in sales were broad based but led by electronics & appliance stores, down 2.8 percent; gasoline stations, down 2.3 percent; and food & beverage stores, down 1.0 percent. The downward tug by gasoline sales hardly explains the overall weakness. Excluding motor vehicles and gasoline, retail sales fell 0.3 percent after declining 1.0 percent in March.
Overall retail sales on a year-on-year basis in April were down 10.1 percent, down from minus 9.6 percent in March. Excluding motor vehicles, the year-on-year rate worsened to down 7.7 percent from down 6.3 percent in March.
Equities will not like today’s retail sales numbers. The green shoots view of the economy holds true only if the consumer sector stabilizes. Look for possible flight to safety in the bond market.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.