US consumption weakness extends into Q2

US retail sales for April were weak. Control retail sales (excluding gasoline, autos, building materials and food) were flat and sales excluding autos and gasoline were up only 0.2% m/m. 

Headline retail sales were also flat, with gasoline sales down 0.7% m/m and auto sales down 0.4%. There were revisions to the control group of +0.2pp for March, -0.15pp for February, +0.12pp for January and -0.08 for December. 

Net, this leaves Q1 private consumption poised for a marginal upward revision to 2.0% q/q AR, from 1.9%. More important though is the momentum into this quarter, which is not impressive. 

Given today's retail sales data, real personal consumption estimated was up only 0.05% m/m in April and, even with a rebound in the coming months, it will be difficult to get Q2 consumption growth above 3.0% q/q AR. 

Real incomes have been grew at a 4.0% q/q AR pace in Q1 but real personal spending increased by only 2.0%, pushing the savings rate higher. 

Consumer sentiment remains high, job growth has held up and labour market indicators generally suggest that job growth continued at a decent pace in May. 

"The current pace of consumption growth is too low in our view and thus we continue to expect a rebound", said Danske Bank in a report on Thursday.