Retail sales aren’t making cash registers sing, but it’s an improvement over a year ago (credit: Ramiro Mendes on Unsplash)
Retail sales inched up 0.4% in April from the prior month, exactly matching a rise in the Consumer Price Index, according to figures from the U.S. Commerce Department. It represented the first gain in retail sales since January, a positive sign amid economic fears and continued inflation.
Still, the gain was half of the 0.8% increase expected by Dow Jones analysts. It was a significant improvement over March’s results, however, with an adjusted figure of -0.7%. Those figures are unadjusted for inflation.
The department reported a 1.6% gain in overall retail sales over April 2022, while the CPI in the same period was up more than three times that figure, at +4.9%, down from a high of 9.1% in June of last year. Excluding auto and gasoline, retail sales were up 4.3% in April vs. a year ago, adjusted for inflation.
Among the retail categories tracked by the bureau, health and personal care saw the greatest gain for the first four months of 2023, increasing 7.2% to $137.4 billion, followed by general merchandise (up 5.5% to $270.9 billion), food and beverage (up 4.6% to $315.4 billion), and clothing and accessories (up 0.9% to $89.7 billion). Sporting goods, musical instruments and books inched up 0.3% to $29.8 billion.
Electronics and appliance sales dipped 1.8% to $28.3 billion, while furniture and home goods were down 1.6% to $44.6 billion. Sales of bigger-ticket discretionary items continue to be the most challenged in the current environment.
“While lower tax refunds and unseasonable weather have certainly not helped retail sales, underlying demand trends, particularly for discretionary categories, seem to have further softened in recent months,” said Baird analyst Peter Benedict in a research note. “Sporting goods looked particularly weak in April, and the pace of year-over-year declines within furniture/home furnishings and electronics/appliances accelerated from March.”
Benedict said that factors like moderating inflation, indications of growing consumer stress and tightening credit conditions “suggest a further deceleration in retail sales growth, if not outright year-over-year declines, across the balance of 2023.”
David Silverman, Senior Director of Fitch Ratings, said the 4.3% growth in retail sales excluding auto and gas showed a deceleration from 6%-7% rates in recent months, with declines across most categories other than grocery, general merchandise and restaurants.
“This is somewhat due to easing inflation but also a softening consumer and continued spending shifts toward services,” he wrote in a note. “Fitch expects sales volumes across many retailers to be negative this year, with Home Depot’s report an example, although good inventory and cost control could support operating earnings and cash flow for better managed companies.”
Silverman provided some important context to recent retail earnings reports, with both Home Depot and Target coming in with Q1 sales declines vs. 2022 — the latter after issuing a warning about demand softening — but up about 40% over the pre-pandemic year of 2019, often considered a baseline.
“To some extent, we’ve been surprised by the strength of retail sales volume over the last year or so,” he said. “It would be easy to expect more of a reversion to pre-pandemic levels, plus or minus some growth. Are you evaluating Home Depot or Target on negative Q1 sales, or that it’s 40% higher than four years ago? That to us feels pretty darn strong.”
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