Consumer spending was weak in the first quarter and the first look at the second quarter is no better than moderate. Total sales rose an as-expected 0.3 percent in April which pretty much tells the story of the month. Vehicle sales, despite a decline in previously reported unit sales, did post a rise of 0.1 percent in the month which is very respectable given the oversized comparison with March when sales jumped 2.1 percent. Gasoline sales rose an outsized 0.8 percent on higher prices in the month and when excluding both vehicles and gas, retail sales matched the 0.3 percent showing at the headline level.
Details throughout the report are mixed: furniture, which offers a reading on housing demand, extended recent strength with a 0.8 percent gain but restaurants, and their indication on discretionary spending, fell 0.3 percent but following a sharp gain in February. Apparel sales, which have been mixed, surged 1.4 percent but sales at department stores, which have been very weak, managed only a 0.2 percent gain. Building materials rose 0.4 percent in another positive sign for residential investment while nonstore retailers, the report's strongest component, posted a solid 0.6 percent gain.
Control group sales, which are another core measure and a direct input into GDP, rose 0.4 percent which, given the weak comparison in the first quarter, does point to an early lift for second-quarter consumer spending. But the lift is not dramatic especially considering this year's tax cut, which has raised disposable income, and of course the enormous demand in the labor market. Note that today's report includes upward revisions to March, up another 2 tenths to 0.8 percent, and a 1 tenth upward revision to February which now stands at unchanged. These revisions will help limit the weakness of consumer spending in the second estimate for first-quarter GDP.
At a moderate 0.3 percent consensus gain, April retail sales, unlike those for March, are not expected to get any boost from vehicles following the separately released falloff in the month's unit sales. A more solid 0.5 percent increase is the call for ex-auto sales which are expected to get a boost from the month's higher gas prices. When excluding both autos and gasoline, sales are seen rising 0.4 percent with control group sales, which also exclude food services and building materials, also expected to increase 0.4 percent. Consumer spending proved very soft in the first quarter and this report will mark the first spending data for the second quarter.