The U.S. consumer is alive and quite well.
In fact, they spent a good chunk of their paychecks on retail in May 2018, adding even more fuel to an explosive U.S. economy.
U.S. retail sales were up 0.8% month over month to $502 billion, according to the U.S. Commerce Department, marking the biggest month over month jump we’ve seen since November 2017. Year over year, May sales were up 5.9%.
On average, economists had only expected an increase of 0.4%.
If we exclude auto, gas, building materials and food services, retail sales increased 0.5 percent last month after an upwardly revised 0.6 percent increase in April.
To be honest, we expect to see further improvement with solid jobs growth and higher consumer confidence. Granted, inflation may be a slight concern, but it looks like the U.S. consumer is in a good spot.
“The economy is looking strong and households have a solid financial foundation on which to base their spending,” said Jack Kleinhenz, National Retail Federation (NRF) chief economist. “We have seen ongoing momentum over the last several months and believe sales growth should remain healthy and consistent with our 2018 outlook.”
Some of the best numbers came from online sales, which posted a 9.1% year over year increase, and a 0.1% month over month improvement. Clothing and clothing accessory stores saw sales increase 8.2% year over year, and 1.3% month over month. Building material and garden supply stores saw 5.3% year over year growth and month over month grow of 2.4%.
Sales at auto and parts dealers rose 0.5 percent, consistent with recent reports showing that May vehicle sales were surprisingly strong.
“U.S. households are back to their free spending ways, with the strength of May’s retail sales figures implying that second-quarter real consumption growth (and GDP growth for that matter) will now be more than 4% annualized. With the benefit of the tax cuts, strong employment growth and a slow acceleration in hourly wage growth, consumption growth should remain strong going into the second half of this year,” said Paul Ashworth, chief U.S. economist at Capital Economics, as quoted by Market Watch.
In short, U.S. consumer spending is on fire.
With a combination of lower tax rates and a tighter than expected labor market causing further growth in disposable income, it’s tough to argue for a slowdown anytime soon. In fact, because of the stronger labor market, the Federal Reserve raised rates for the second time this year and projected two more increases for 2018.
The market and consumers couldn’t care less about those rate increases because the economy is so strong.
Stay tuned for more from The Cheap Investor.