Consumer Spending Up for Fourth Straight Month

According to the Census Bureau’s Advance Retail Sales Report, consumer spending climbed for the fourth straight month in May. Headline sales rose 0.9%, almost double the projected 0.5% growth and marking an acceleration from April’s 0.4% rise.

Key Takeaways

• Headline retail sales rose 0.9% in May to $763.7 billion, climbing 6.9% year-over-year.
• Core retail sales grew 0.8% in May, marking a 12th consecutive monthly increase and a 7.5% year-over-year gain.
• Purchases rose 0.8% in May, beating the 0.4% forecast and increasing 6.4% year-over-year.

For an inflation-adjusted perspective on retail sales, take a look at our Real Retail Sales commentary.

The chart below is a log-scale snapshot of retail sales since the early 1990s. The three exponential regressions through the data help us to evaluate the long-term trend of this key economic indicator.

1. The light purple line is a linear regression through the complete data series.
2. The green line is a regression from the start of the series through the end of 2007 and then extrapolated to the present – thus excluding the Financial Crisis.
3. The blue line is a regression from the start of the series through the end of 2019 and then extrapolated to the present – thus excluding the COVID-19 pandemic.

Monthly retail sales have been above the light purple and blue line since March 2021, signaling increased consumer spending that was most likely pent up as a result of the pandemic.

The year-over-year percent change provides another perspective on the historical trend. Current retail sales are up 6.9% compared to one year ago, the largest annual growth since January 2023. Here is the headline series with a callout to the most recent 12 months.

Core Retail Sales (Excluding Autos)

Core sales were up for a twelfth straight month in May, rising 0.8%. This was up from the 0.7% growth in April and was higher than the 0.6% forecast.

Core sales are up 7.5% year-over-year, the largest annual increase since January 2023.

Retail Sales: “Control” Purchases

To find the true signal through the noise of the energy crisis, we look at “Control” purchases, which is an even more “core” view of retail sales. This series is the most reliable reading of the economy as it excludes: motor vehicles & parts, gasoline stations, building materials, food services & drinking places. Retail sales control purchases rose 0.8% in May, the fifth consecutive increase. This beat expectations of 0.4% growth and was up from 0.4% in April.

Similar to the retail sales snapshot chart earlier, the chart below is a log-scale snapshot of control purchases since the early 1990s and includes two of the exponential regressions previously mentioned.

Current control purchases are up 6.4% compared to one year ago, the largest annual growth since February 2023.

As shown in the chart below, the “control” series offers a much smoother, less volatile view of consumer health compared to the headline data, which is currently being whipped around by geopolitical instability and energy markets. Note that the two series follow each other closely, but headline sales have more extreme highs and lows than the control series.