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The Consumer Cometh: Retail Sales Rise in May

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Advance retail sales make markets happy

The American shopper is venturing out to shop for autos, apparel, and building materials. Advance estimates show that retail sales rose 1.2% in May 2015 from a month ago. The good news doesn’t end there. Sales figures for both April and March were revised upward to show a 0.2% and 1.5% rise, respectively, with the rate in March being the highest in five years.

Core retail sales, which exclude automobiles, gasoline, building materials, and food services, rose 0.7% in May, after having risen by 0.1% in April. Core retail sales figures are used to calculate consumer spending, which determines economic output. A rise in this control group shows that the consumer spending input in the calculation of GDP (gross domestic product) should help prop up economic growth.

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Since consumer spending makes up ~67% of GDP, it may mean another dim quarter for economic growth. Subdued sales will affect ETFs such as the Consumer Discretionary Select Sector SPDR Fund (XLY) and the Consumer Staples Select Sector SPDR Fund (XLP). This won’t be good for broader equity market tracking ETFs such as the iShares Core S&P 500 (IVV) either, due to the implications of low core sales on the overall economy.

Do keep in mind, though, these numbers are volatile and are subject to revision.

Excluding motor vehicles and parts, retail sales rose by 1% in May after having crawled up by 0.1% in April.

Auto sales continue to rise, yet pump sales fall again

Motor vehicle and parts dealers, which had reported a healthy 0.7% rise in sales in April, saw sales rise again by 2% in May. Automakers General Motors (GM) and Fiat Chrysler (FCAU) reported higher sales than expected.

Gasoline station sales rose 3.7% month-over-month in May after having fallen by 0.6% in April, when gasoline prices rose.

Eating out and other segments

Americans continued to eat out. Food services and drinking places reported a 0.1% rise in monthly sales in May.

Home furnishing providers like Lowe’s (LOW) and Home Depot (HD) saw sales rise by 2.1%.

Purchases at department stores—excluding leased departments—rose by 0.8% in May after having fallen by a downwardly revised 0.7% in April.

The health and personal care store segment, including stores like CVS Health (CVS), was the only major segment to see sales fall. Sales fell by 0.3% month-over-month in May after having risen by 0.4% in April.

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