US Retail Sales: Unequivocally positive news for consumer spending – Wells Fargo

Retail Sales in May posted a record increase in the US, significantly above expectations. According to analysts at Wells Fargo, retail sales offer the latest evidence that economic activity snapped back in May. If this keeps up, they point out it could turn out to be a short recession.

Key Quotes: 

“Retailers reported a record 17.7% increase in sales in May. Any monthly increase larger than 6.7% would have been a record, so this outturn cleared that bar with room to spare. It was also more than double the consensus expectation for an 8.4% increase.”

“In the month of May, retailers saw more than half of the lost spending return. After being down more than 20%, retail sales are now off only about 8% since February.”

“Control group sales, which excludes autos, gas, building materials and food services, rose 10.6% in May. Despite this surge, after the virus-related dropoff in April, control group sales are still 3.3% below its March high. The year-over-year rate, however, is now positive, up 2% after dropping to -7.2% in April, but the three-month annualized rate is still -6.4%.”

“While we do not expect a monthly gain of this magnitude to be repeated in June retail sales, we do think record household savings augers well for sustained consumer spending growth in the second half of the year.”