Retail Sales Jump In May, Topping High Estimates

The FOMC said yesterday that household spending has picked up and indeed it has. Retail sales jumped 0.8 percent in May which easily tops Econoday's high estimate. And the results include an upward revision to April which now stands at a 0.4 percent gain.

The report shows balanced gains including a 1.3 percent jump at restaurants and a 0.5 percent increase for motor vehicles, both pointing to rising discretionary demand. Building materials, which have been soft, surged 2.4 percent in what will be a plus for residential investment. Department stores have been very weak but have now put together back-to-back gains of 1.5 percent in May and 0.7 percent in April. Clothing stores, at 1.3 and 1.2 percent, have likewise bounced back with sizable gains the last two months. Gasoline sales have risen 2.0 and 1.0 percent in May and April on higher prices. Disappointments include a decline for furniture in May and only a 0.1 percent rise for nonstore retailers (e-commerce).

It was only a few weeks ago that the Fed's Beige Book had downgraded consumer spending to "soft" which highlights the importance of today's report, one that, as far as the Fed at least, marks a pivot upward. Consumer spending so far this year has been mixed but given the strength of the jobs market, improvement should be no surprise.