This morning, the U.S. Census Bureau reported retail sales for April. The headline number looks pretty solid.
Seasonally adjusted retail sales were $366.4 billion, up 0.4% from March and 8.8% from April 2009 (which is against really low comps). Economists were expecting a monthly increase of 0.2%. The March number was revised higher to 2.1% from 1.9%.
When we dig a little deeper, however, the report isn’t as strong as the headline suggests.
Driving the April’s gains were building materials, which increases $1.5 billion, or 6.9%, to $25.5 billion. Autos were up 0.5%; gasoline stations were up 0.5%, and drug stores increased 0.9%.
Growth in those areas masked weakness in other categories. Electronics and restaurants were flat. However, furniture was down 1.2%; grocery stores fell 0.5%; apparel stores were down 0.9%; sporting goods dropped 1.4%; and general merchandise stores fell 0.4%. If we combine these categories (i.e., sales ex-autos, building materials, and gas stations), retail sales decreased 0.2%.
That’s the first decline since December 2009 for core retail sales. Going forward, it is hard to believe that we will continue to see retail sales growth driven by building materials and autos. Growth will need to come from core retail stores like department stores, grocers and electronics stores.
In order for that to play out, we need to see more jobs and higher incomes. That will put more money in the pockets of consumers, allowing them to make more frequent visits to retail stores such as Macy’s (M), Nordstrom (JWN), or Best Buy (BBY).
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