The Commerce Department reported Thursday its May retail sales figures which were $385.4 billion, up from $381.6 billion in April and showed a 1.0% gain, better than the 0.5% consensus.
Retail sales showed that general merchandise stores, excluding autos – increased 1.2%, beating the 0.7% consensus expected gain, registering this way the best showing since a 2.1 percent rise in March of fiscal ’07.
Sales were also revised up substantially for March and April led by gas stations, building materials, and general merchandise stores.
Gasoline station sales posted an annual increase of 13.8 percent from May of fiscal ’07 with auto dealers sales increasing by only 0.3 percent in May ’08, but that still represented a small rebound after a big 2.1 percent drop in April.
Meanwhile, the March to April fiscal ’08 percent change was revised from -0.2 percent to +0.4 percent. The business inventories grew by 0.5 percent in April, more than double the 0.2 percent rise in March and the best showing since inventories rose by 1 percent in January.
The May retail sales increase was double what economists had been expecting and it’s and indication in our view of an economy flatly rejecting the pretension of a consumer-led recession theory.
Yes, we are getting a major boost from the $48 million in economic stimulus payments the government sent out in May, which is just under half of the total stimulus aimed at consumers. However, the persisting non-recession argument rests on the fact that sales are up at an 8% annual rate in the past three months while core retail sales (excluding autos, building materials, and gas) are up at a 10% rate.
More importantly, March and April figures (revised from -0.2 percent to +0.4 percent) were about as strong as in May, suggesting the rise in consumption is based solely on fundamentals, not government checks.
Based on today’s report, this is the biggest jump in nearly six months with solid April-May spending in just about every category. The data convincingly showed that the fiscal stimulus and regular spending trends are not being completely destroyed by higher gas prices. It is likely that consumer spending in June and July will also post good gains. This, despite weak consumer confidence readings and the credit crunch.