The U.S. Census Bureau will release its inflation-adjusted retail sales figures for the month of May tomorrow at 8:30 a.m. ET. Forecasts expect a 1.1 percent increase month-over-month. In April, retail sales were flat.
Retail sales are considered the foremost indicator of consumer spending, which still constitute about 70 percent of the American economy.
Benzinga spoke to experts on the Street to get their thoughts ahead of tomorrow’s report.
JJ Kinahan: Chief Strategist, TD Ameritrade
Kinahan believes that consumer spending is the final piece of the puzzle for the Federal Reserve in determining when to raise interest rates. According to him, employment, wage growth, the housing sector and even auto sales are all headed in the right direction.
He explained that good signs from durable goods sales and retail sales would “make [the Fed’s] decision a lot easier.”
Kinahan advised investors to pay attention to “Retail Sales Ex Gas/Autos” figure, since it is already well-known that car sales were positive (based on automakers’ monthly sales reports) and since gasoline sales “sort of are what they are.” This number, therefore, will provide a clearer insight into consumer spending as opposed to the raw retail sales number.
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Adam Sarhan: CEO, Sarhan Capital
Sarhan said that the retail sales report will represent the final macroeconomic indicator (barring a major outlier) that could significantly sway the Fed’s decision on when to hike rates before its meeting next Wednesday.
Since the Fed has claimed to be data dependent, Sarhan stated that retail sales number will have a direct impact on whichever decision Yellen and Company make.
Sarhan agreed with Kinahan that the Fed would ideally like to see more consumer spending before raising rates, but he also called attention to the housing market; citing mortgage rate hikes on Wednesday, Sarhan told Benzinga that real estate was the “biggest missing piece.”
According to Sarhan, the housing market and consumer spending largely go hand-in-hand, since many Americans’ biggest assets are their homes. Thus, he shared, “When housing prices go up, all of a sudden you see consumer confidence and consumer spending go up too.”
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Tim Anderson: Managing Director, TJM Investments
Anderson noted that retail sales can be falsely deflated due to the fact that sales usually aren’t logged until the products leave the warehouse. He predicts that many units may have been delayed at West Coast ports on their way to warehouses, and thus some transactions that actually occurred in May may not be factored into consumer sales until the June report.
Anderson believes that raw retail sales will be boosted by gasoline prices, which are slightly up since April, and automobile sales, where lending has opened up.
Nevertheless, he doesn’t think consumers are ever going to be able to return to the “freewheeling spending that we saw in the ’90s.” According to him, higher costs of living, healthcare and education have added major constraints to consumer spending during the past decade.
Therefore, Anderson stated that he expects the retail sales number to be “decent,” but not amazing.