Retail Sales Strong In May

Fives are strong and they're wild in the latest retail sales report that mostly beat expectations in May and includes sharp upward revisions to April. May's 0.5 percent headline gain missed Econoday's consensus by 2 tenths but that's where the shortcomings stop. Ex-auto sales, ex-auto ex-gas sales, and control group sales all rose 0.5 percent and all beat their respective consensus forecasts by 1 tenth.

April headline sales are revised upward (you guessed it) by 5 tenths to a 0.3 percent increase. Other readings were revised 5 to 4 tenths higher with the control group, which is an input into GDP, now at 0.4 percent in April to provide a second strong showing.

Consistent strength is the description for general merchandise, a large component that includes department stores and which has posted gains of 0.7 percent in May and 0.8 and 1.2 percent in April and March. Nonstore retailers, at 1.4 percent in May, have shown similar strength with restaurants, at May's 0.7 percent, also very solid in a sign of discretionary strength.

Less consistent have been auto sales, though they did rise 0.7 percent in May, and also building materials which edged up in May by 0.1 percent but follow prior weakness. Sales at gasoline stations have been very strong this year though May's 0.3 percent gain was well down from prior increases.

The 0.5 and 0.4 percent back-to-back gains in April and May for the control group are a very positive indication for personal consumption expenditures and will be lifting second-quarter GDP estimates. Retail sales data had been jaggedly saw toothed since December's collapse though the latest report, and its big upward revision, levels the view out to show a favorable consumer trend. For the Federal Reserve, today's results will ease the pressure at next week's FOMC to open the door to a near-term rate cut.