I am not surprised that the retail sales remained unchanged in April. Although warmer weather is upon us, the April retail sales data did not warm up the way the industry would have liked.
Retail Sales and Consumer Confidence Fading
After barely growing in the first three months of 2015, U.S. retail sales were flat in April and continue to disappoint. Consumers cutting back on their purchases could be an indication that the economy is slowing down. (Source: U.S. Census Bureau, May 13, 2015.)
The April retail sales data highlights a number of areas of economic concern.
The retail sales directly correspond to consumer spending, a component of gross domestic product (GDP). Flat retail sales could be a signal that households have become more cautious with their spending. Consumption makes up more than two-thirds of the country’s GDP. Therefore, when consumption decreases, it’s hard to believe that we are in a period of economic growth.
The mainstream contends that consumers are saving money because of cheaper gas prices and thus have additional disposable income. But are they confident enough to spend this supposed new-found cash?
The answer is no; consumer confidence is deteriorating. The Conference Board Consumer Confidence Index, which increased in March, declined in April. The Index currently stands at 95.2, down sharply from 101.4 in March. (Source: conference-board.org, April 28, 2015.)
April’s weak retail sales data may force the Federal Reserve to reconsider the timeline of raising the interest rate. I would think that it is unlikely the Fed raises the interest rate sooner than December of this year.
U.S. Dollar Falls as April’s Retail Sales Data Disappoint
The U.S. dollar weakened against the euro and the yen after the frustrating retail sales report. The greenback fell against the two currencies, as one euro bought US$1.1312 after the data were released, versus $1.1228 before the numbers came out.
The U.S. currency also fell against the yen to ¥119.32 from ¥119.69, down 0.5% for the day. (Source: The Wall Street Journal, May 13, 2015.)
As it stands, I think that the market is signaling that second quarter 2015 won’t be as strong as people think.