In this morning’s data, Retail Sales increased 0.1% in April, slightly higher than expected following a sizable move higher in the previous month. The Control Group, which is a closer measure of the inputs for GDP that excludes sales for food, autos, building materials, and gas stations, decreased -0.2% in April, less than the 0.3% increase expected and well below the previous month’s revised increase.
Reviewing the various categories, monthly sales for Building Material & Garden dealers, up 0.8%, were relatively strong while monthly sales at Sporting Goods, Hobby, & Book stores, down -2.5%, were relatively weak.
Meanwhile, the Producer Price Index decreased -0.5% in April, less than expected and grew 2.4% on an annual basis. The Core rate, which excludes food and energy prices, decreased -0.4% in April, also less than expected and grew 3.1% on an annual basis.
Overall, headline retail sales increased slightly in April following a sizable increase in March. Individuals still purchased building materials and garden supplies but slowed down their spending on sporting goods and hobbies. Consumers appear to be slowing down a bit, especially considering the control group was negative in the month. Meanwhile, inflation measures at the company level were down in the month, but the annual measures are above the 2% threshold. In addition, Walmart suggested in comments during their earnings release that they may have to raise some prices for consumers given the speed and magnitude of prices coming to the company at the present time.
Considering there is still uncertainty regarding tariff negotiations and companies may have to pass along higher costs to consumers, the Federal Reserve will likely remain on hold with monetary policy. As a result, the timing of additional resolutions on tariff negotiations and the possible emergence of pro-growth policies with the current administration will both be key for the economy and markets in the coming weeks.
In all, the 10-year US treasury yield ticks slightly higher following the report and equity futures are lower as we head into the market open.
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