US: April retail sales with revisions suggest firmer momentum in Q2 – Nomura

Analysts at Nomura note that the US retail sales rose 0.3% m-o-m in April, above their estimate but in line with market expectations (Nomura: 0.2%, Consensus: 0.3%), after an upwardly revised increase of 0.8% in March.

Key Quotes

“Core (“control group”) retail sales rose 0.4% m-o-m, above our estimate but matching market expectations (Nomura: 0.3%, Consensus: 0.4%). Core retail sales in March and February were revised up, implying better momentum in heading into Q2.”

“The pickup in retail sales after weak growth in Q1 is consistent with our view that economic momentum remains firm, in line with positive labor market data and consumer/business sentiment indicators. We continue to expect growth in personal consumption expenditure (PCE) to accelerate in Q2 relative to a somewhat soft Q1 estimate, supported by the recent tax cuts and healthy labor market. Our Q2 GDP tracking estimate, now at 3.3% q-o-q saar, points to solid contribution to Q2 real GDP growth from PCE after a brief pause in Q1.”

“GDP tracking update: Core retail sales in April were slightly stronger than we expected. Upward revisions to March and February sales suggest stronger personal consumption expenditure in Q1 and modestly better momentum in Q2. However, the March business inventory report indicated that retail inventories fell 0.5% m-o-m, weaker than the advance estimate. Inventory buildup in Q1 was likely weaker than the BEA’s assumption, which likely offset the positive impact from upward revisions to core retail sales, while the lower-jumping off point will likely boost change in inventories in Q2. Thus, our Q1 real GDP tracking estimate remains unchanged at 2.3% q-o-q saar. We raised our Q2 real GDP tracking estimate by 0.1pp to 3.3% q-o-q saar.”