U.S. retail sales unexpectedly fell 0.2% in April, government figures showed Friday, raising worries that a pillar of strength in the economy– consumer spending– may be shaky. This marked the biggest decline in retail sales since last September. Excluding automobiles, retail sales were flat. Read full government report. Economists had been expecting a soft April sales report, but not one this weak. The average forecast in a MarketWatch survey called for a 0.3% rise in retail sales in April.
To put this in perspective, Dave the Sage notes first that retail sales are not to be confused with the consumption component of GDP. The biggest chunk of the latter is services, which are not included in retail sales:
Second, we’d already seen evidence that retail sales have been diverging south of total consumption spending:
Yes, the April retail sales were distinctly worse than recent months. But if that rings your panic alarm, you’d be a nervous wreck:
None of which is to deny that the broader trend is one of softening:
So, if you thought we were going to see 3% real GDP growth in 2007:Q2, this would knock you off your high horse. But if you thought we were going to limp through with weak but positive growth, this is all quite consistent with that picture. Taken by itself, granted, the April retail sales figure constitutes another negative. As did the April employment numbers.
But then again, the March employment numbers had sent an equally strong bullish signal. And if your economic call changes each month like the third graph shown here, well, then each month you’ll always have something interesting to say.
And so does Dave, but in a less surprising sort of way.