U.S. Economics – Retail Sales

Intro

Retail Sales accelerated by 0.2% m/m in February, following a downwardly revised -1.2% m/m (initial -0.9%) pace in January. Importantly for the 1Q25 GDP calculation, the Retail Control Group recovered its -1.0% m/m decline in January with a 1.0% m/m advance in February, putting the y/y pace at 4.4%. Overall, trends in nominal consumer spending remain positive, but another tough y/y comparison in March likely adds downward pressure on the Headline and Retail Control Group data.

Retail Sales

The Signals:

• • Retail Sales (Chart 1)
    • Headline retail sales accelerated by 0.2% m/m in February, but the y/y pace slowed to 3.1% from 3.9%
      • The comparison set will get tougher in March, moving from 2.1% to 3.6%, likely adding downward pressure to y/y growth.
  • Retail Control Group (Chart 2)
    • The Control Group accelerated by 1.0% m/m in February and the y/y pace accelerated to 4.4% from 3.7%, continuing its stretch of prints above the average growth rate of 3.6% from 2015 to 2019.
      • The comparison set will get tougher in March, moving from 2.6% to 4.7%, likely adding downward pressure to y/y growth.
  • Real Retail Sales (Chart 3)
    • Retail Sales, when adjusted for inflation, were effectively flat m/m in February, following a -1.7% decline in January, and the y/y pace slowed to 0.3% from 0.9%.
      • The divergence between nominal and real activity has been on our radar since the early part of 2022, though the expected negative ramifications of that dynamic have not made their way into Real PCE, the consumer spending data that feeds into GDP.
      • While Real Retail Sales has been below its 2015 to 2019 average of 1.9% since March 2022, Real PCE has largely stayed around its average of 2.7% and has been above that mark since May 2024.
  • Credit Card Delinquency Rates (Chart 4)
    • One of the ways we track the durability of consumer spending is by monitoring credit card delinquency rates from select company filings.
      • In the latest round of data, we saw more evidence that the y/y delta in delinquency rates slowed against tough comparisons.
      • Moving forward, we will be watching how this data develops as it moves against its easiest comparisons between May and June.

The Takeaway:

• Consumer spending has remained resilient, but tougher comparisons in March will likely increase the probability of incremental softness in y/y growth at the Headline level.
• The y/y acceleration in the Control Group was a positive development in terms of GDP but will face a similar comparison set as Headline data.
• The y/y pace of delinquency rates has slowed in the data we track, which should be positive for future spending as Headline and Control Group comparisons ease in April.

Visuals:

(Chart 1)

Source: Macrobond

(Chart 2)

Source: Macrobond

(Chart 3)

Source: Macrobond

(Chart 4)

Source: Company Filings

Market Trends:

Source: Macrobond

The views expressed herein are presented for informational purposes only and are not intended as a recommendation to invest in any particular asset class or security or as a promise of future performance.  The information, opinions, and views contained herein are current only as of the date hereof and are subject to change at any time without prior notice.