Even though retail sales decreased 0.2 percent last month, the US dollar
skyrocketed on the report because excluding autos, sales actually increased 0.5
percent. Interestingly enough, despite the rise in gasoline prices, gas station
receipts actually fell. This suggests that Americans are driving less and buying
fewer cars. This weekend, the NY Times reported that gas prices are sending a
surge of riders to mass transit and the details of the retail sales report
confirms that. I expect the Metro North trains to get even more packed.
Consumers did increase their spending on building materials, electronics and
As indicated in my
retail sales preview yesterday, earnings have increased for many discount
retailers and there were many reasons to believe that retail sales was not
exceptionally weak in April:
1. The International Council of Shopping Centers (ICSC) reported a
3.6 percent increase in chain store sales
2. Strong earnings have been
reported by discounters such as Wal-Mart, Costco and Kohl's.
SpendingPulse, the retail data service of MasterCard Advisors reported 0.1
percent rise in spending
According to Ken Perkins of Retail Metrics Inc, April was the best month for
retailers since November. Weak job growth does not always translate into weak
consumer spending. In October 2001, when non-farm payrolls dropped 325k, retail
sales actually jumped 6.6 percent. Retail sales can be very volatile on a month
to month basis.
Even though the numbers give traders some reason to be dollar bullish,
consumer spending still remains vulnerable. Therefore don't expect too much from
the dollar rally.