US Economics: Retail Sales Preview: Spending growth remains steady

Research evidence excerpt

US Economics: Retail Sales Preview: Spending growth remains steady

IdeaM

May Retail Sales: Spending growth remains steady

We expect that headline retail sales rose 0.5% m/m, with headline-ex-autos up 0.6%.

Control group sales are expected to be up 0.2% in April.

Within the components of the headline retail sales, the sales at gasoline stations remain

strong (4.4%m/m) as gas prices remain elevated. The sales of autos are expected to be up

in May (0.4%m/m) after declining in April. Sales of building materials are expected to

decline in May (-0.3%m/m), and restaurant sales are forecast to rise 0.5%.

For control group sales, the 0.2% m/m gain is relatively strong in real terms, as we expect

control group prices for May were down 0.1% m/m. The factors that support continued

spending growth in May come from two main factors: (1) continued strength in the

monthly pace of growth of labor market income, driven by the gains in the employment

numbers, and (2) credit/debit card transactions data in May for the relevant categories

showed some improvement in May relative to April.

This estimate of retail sales control implies that real spending for 2Q26 is tracking at 2.6%

q/q saar. This tracking outpaces our forecast for real spending growth for 2Q (1.7%q/q

saar). The greater strength is largely due to stronger base effects for goods from 1Q, as

growth in real goods spending was weak in Jan but very strong in Feb and March. The

strength is also partly due to the re-acceleration in the labor market, which keeps nominal

labor market income growth at a faster pace than in 1Q. However, we do not expect a

sharp re-acceleration in consumption spending growth. As the pace of net wealth gains for

households has slowed, we expect that there could be some downside risk to spending if