Merk Investments: May Advance Retail Sales
Advance retail sales for the moth of May increased 1.0% and 1.2% in the core ex-autos category. Ex-gas, sales rose 0.8%, ex-autos and gas advanced 1.0% and ex-food service retail purchases were up 1.0%. Inside the data demand for building materials rose 2.4% and purchases at gasoline stations increased 2.6%, which were the primary catalyst for the above expectations print. Sales were solid across the board with purchases of electronics increasing 0.7%, general merchandise 1.2% and action at department stores rose 0.8%. Sales among non-store retailers, which is a proxy for e-commerce, rose 1.6%.
While the data did exceed market expectations and our own forecast, our position on the impact and durability of the stimulus due to the rebate checks remains that they will be limited at best. Outside of the increase in purchases of building materials, which was impressive, the surge in month over month sales was disproportionately driven by purchases at gasoline stations and once one begins to look at the real impact on GDP, we do not see enough economic activity to warrant an upward revision in our growth forecast. Moreover, the 17.8% annual increase in import prices and the move to 384K in jobless claims strongly suggest that the increase in sales will prove transitory and personal consumption in real terms will continue to be modest and well below the expansionary trend. Once one begins to look over the horizon for a catalyst to support consumption, all that is left remains is a stressed consumer whose purchasing power is rapidly being reduced by the ravages of inflation.
Joseph Brusuelas
Merk Investments
Chief Economist/VP Global Strategy
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