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April retail sales beat expectations, but mainly because they weren't as weak as expected (+0.1% vs. -0.3%). Growth in sales has moderated somewhat this year, probably due to the expiration of the payroll tax holiday. But the slowdown has not been as big as many had feared.

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As the second chart above shows, the year-over-year growth in retail sales is now just under 4%. Over the past six months, the annualized growth rate was 3.4%. So we've definitely seen a decline in the growth rate of sales, but it's not a serious slowdown. And falling gasoline prices explain a good deal of the recent slowdown.

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The chart above shows the retail sales "control group," which excludes auto, building materials, and gasoline station sales. The result is a much less volatile series that until about a year ago was growing at a reasonably healthy 5%-6% rate. It's now growing at a 4%-5% rate, a bit less than the long-term average 5% leading up to the Great Recession. The roughly 10% "shortfall" in sales since 2008 can be explained by the reduction in the labor force participation rate and the rather disappointingly slow growth in jobs. This suggests the economy is about 10% smaller than it could have been, and that's very disappointing. Regardless, the economy still shows every sign of continuing to grow.

Once again, I think the most important takeaway from data such as this is that the economy continues to avoid recession. For investors, avoiding recession is all that matters.

Source: Retail Sales Grow Moderately