April Retail Sales Grow 0.9% as Consumers Defy Inflation and Keep Spending

APRIL US RETAIL SALES KEY POINTS:

• April U.S. retail sales grow 0.9%, in line with market expectations
• Strong consumer spending suggests that consumption remains resilient despite soaring inflation
• S&P 500 futures hold most pre-market gains as encouraging economic data ease worries that the U.S. economy is headed off the cliff

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U.S. retail sales increased at a healthy pace last month, easing worries that soaring price pressures and falling real incomes are starting to significantly curtail consumption. According to the Commerce Department, Advance Monthly Sales for Retail and Food Services grew 0.9%, in line with the median forecast in a Bloomberg News survey. Stripping away autos, the value of retail purchases topped projections, rising 0.6% versus consensus expectations for a 0.4% advance.

Although some Wall Street analysts expected shoppers to slow purchases due to constrained personal finances, Tuesday’s encouraging numbers suggest that the U.S. consumer remains resilient and still has gas in the tank to fuel the expansion, helped in part by the booming labor market, some wage gains and enhanced savings accumulated during the pandemic.

After U.S. gross domestic product contracted 1.4%on an annualized basis during the first three months of the year, economists were quick to point out that activity would rebound in the near-term amid little indication that the consumer was beginning to crack. Today’s data confirms that assessment and sets the economy up for a good start to the second quarter.

S&P 500 futures held gains immediately after the consumer report card crossed the wires, rising around 1.4% to 4,060 in the pre-market session. With household spending on firm footing, the broader economic outlook remains positive, given that consumption expenditure accounts for roughly 70% of GDP. That said, the retail sales figures may help alleviate the extreme state of pessimism on Wall Street and mounting concern that the U.S. economy is headed for a recession. This sentiment, in turn, may help stabilize risk assets, allowing the stock market to begin to recover.

S&P 500 E-MINI FUTURES (5 MINUTES CHART)

S&P 500 Chart Prepared Using TradingView

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—Written by Diego Colman, Market Strategist for DailyFX