Retail Sales Drop As Import Prices Rise

Equity futures just tanked on economic reports coming in worse than expected.  Retail sales for the month of April were  -0.4%, which is worse than the +0.1% that economists were looking for.  There is another twist that is hard to not notice if you are an inflation hawk: rising import prices.

Here is the breakdown on the retail sales.  On an ex-auto basis, they were -0.5%.  The data for March was also revised lower to -1.3% from an original report of -1.2%.

If you want to know how bad it it is on retail, autos and auto parts were down over 20%.  If you take away spending at gas station, you would have seen the report come in at -0.2%; and if you take away auto related sales and the gas station sales then the reading was -0.3%.  That is partially reflective of lower gas prices, so there is at least some silver lining here.

It seems the one bright spot is that the army of unemployed people are at least getting in shape and tending to themselves as sporting goods, hobby, book, and music stores saw a 0.3% rise. Not surprisingly, there was also a gain in healthcare spending at the retail level.

The drop was exacerbated at -2.8% at electronics stores, -0.5% at retail apparel stores, and -1% at food and beverage stores.  There was even a -0.1% drop in Internet and mail order stores.

There was the largest rise in import prices in nearly a year.  April import prices gained by +1.6% from March, and that is way above a 0.7% gain expected by economists.  The good news is that on a year-over-year basis, this was down over 16% because of the huge drop in commodity prices.  Oil was about half, and if you remove that you would have seen -0.4% from March and -5.6% from a year ago.

JON C. OGG