The long-anticipated slowdown in consumer spending might be underway. Retail sales were unchanged in April, defying consensus expectations for a 0.4% gain and down sharply from the 0.6% (downwardly revised) advance in March. Depleted excess savings, record household debt and a significant slowdown in job growth caused consumers to throttle back their spending last month. A majority of the categories saw negative growth with the biggest declines in non-store retailers (-1.2%), sporting goods (-0.9%), motor vehicles & parts (-0.8%) and health and personal care (-0.6%). Sales at gasoline stations popped 3.1% (the third straight increase) but that was primarily due to higher prices, while receipts at clothing and electronic stores jumped 1.6% and 1.5% respectively. Spending at restaurants and bars – the only services category in the report – edged up 0.2%, more than offsetting the 0.1% dip in March. The flat print pushed the year-on-year growth rate down to 3.0% from 3.8% in March.

Control retail sales – which exclude food services, autos, gasoline stations and building materials and are used to calculate consumer spending in the GDP report – fell 0.3% after an upwardly revised 1.0% rise in March, pointing to slower consumer spending growth in the second quarter. Control retail sales are up 3.5% from a year ago, a sharp moderation from 4.8% in March.

Bottom line: Consumers appear poised to slow their spending after relentless rate hikes, stubbornly high inflation and, more recently, drained excess savings, record high debt burdens and slower job growth.

Table 1 - United States — Retail Sales

(month/month % change)

Source: BMO Economics, Haver Analytics

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