US retail sales surge in May suggests consumer spending was stronger than reported in Q1

US retail sales were solid in May, rising 1.2%, in line with consensus expectations. The strong reading on core retail sales also comes with upward revisions to previous months and signals that consumer spending was stronger than reported in Q1 and has solid momentum in Q2. Core retail sales in March was revised from a gain of 0.5% m/m to 0.9% currently and April core sales was revised from flat to show a gain of 0.1%. 

In May there was broad-based strength across most categories with furniture (0.8%), electronics (0.1%), building materials (2.1%), online sales (1.4%), clothing (1.5%), sporting goods (0.8%), and general merchandise (0.9%) all posting solid increases.

"Altogether, we read this report alongside yesterday's Quarterly Services Survey (QSS) release as solving some of the consumption puzzle. The QSS pointed to stronger growth in health-related spending than was reported in the GDP release and today's retail sales report suggests consumption of retail items was also stronger than reported in Q1. Following May's retail sales report, we are now tracking private consumption growth of 2.3% in Q1 and 2.7% in Q2. This boosted our Q1 GDP tracking estimate to -0.2% and our Q2 tracking estimate to 3.1%." notes Barclays Capital