When it comes to tracking the economy, consumer spending is a biggie, and retail sales has a lot to say about how consumer spending is evolving. Today's retail sales release suggests that consumer spending continues to rise (there are some good reasons for that), and these increases are split between higher spending on gas and spending on a bunch of other stuff. Overall, today's report will be welcomed as good news, as the April numbers came in close to expectations and the March estimates were revised significantly upward.
As we have said before, consumer spending has been boosted by a number of factors, including increased payrolls (we’ve had good jobs numbers recently) and the subsequent increase in payroll income, along with the tax cuts that took effect in January. The fact that the equity markets remain at high levels despite all of the turmoil around the world (Japan, Greece, North Africa, flooding along the Mississippi, etc.) also helps.
Today’s report shows that consumers spent more in April at a wide variety of stores. However, over half the increase in consumer spending over the past two months occurred at gas stations, reflecting higher gas prices. How much more did consumers spend? As you can see in the totally awesome graph below (thanks to Lee Beck), based on U.S. Census Bureau and Energy Information Administration data, consumers spent about $3 billion more at gas stations in April than they did in February, and about $8 billion more than they did a year ago. That’s $8 billion every month that could be spent on other things. Let me do the following math for you: $8 billion divided by 311 million people living in the United States (according to Census population clock) equals $26. In household terms (117.5 million households), that would be $68 per month. And remember, this is just spending at gas stations, and gas is also sold at other places as well (such as some large discount stores).
For those of you who follow economic indicators closely, the fact that Easter fell in the month of April significantly affects retail sales. More precisely, the estimate is that Easter boosts overall sales by about half a percentage point – unless my math is wrong, that’s about $2 billion in additional spending on Peeps. That’s a lot of Peeps. The seasonal adjustment process that Census employs takes Easter into consideration; if it didn’t, then the top-line increase in consumer spending for April would have been more than 1 percent instead of the 0.5 percent reported today.
~Mark Doms, Chief Economist, U.S. Department of Commerce
May 12, 2012
