US Outlook Report: Retail Sales Shift into Higher Gear
The U.S. consumer is coming through in a big way, and not a moment too soon. The retail sales report for May revealed a resilient consumer that will help lift growth in the second quarter and beyond. The retail sales data, much like the numbers on durable goods orders released two weeks ago, saw important upward revisions for March and April, and a better-than-expected follow through for May, that gives the first-quarter economic downturn a far more transitory feel.
The consumer has always been the cornerstone of our second-half rebound forecast, and the latest data appear right in-line with that view. Real consumer spending in the second quarter is likely near 3.0% on an annualized basis, well above the first quarter’s mediocre 1.8% growth performance. This should provide enough oomph to push real GDP growth in the second quarter back up toward 2.5%, even with continued weakness in business investment and trade.
Moreover, the fundamentals driving the consumer remain fully intact. U.S. job openings in April hit a new cyclical high of 5.376 million, the highest level of job openings in the more than 15 years this data has been collected. Consumers and households continue to get richer. Household net worth increased another 2.0% or $1.6 trillion dollars in the first quarter, according to the Fed’s Flow of Funds report released earlier this week.
So despite headwinds from abroad, a strong dollar, and somewhat higher interest rates ahead, the U.S. economic recovery can rely on the bedrock of a re-emerging U.S. consumer to sustain and in some areas accelerate the pace of economic activity.
To learn more, check out this week’s US Outlook Report.
Tags: economy, united states