Latest / Markets with Megan: A Quick Financial Markets Update / Cracks in the Consumer: Retail Sales Miss the Mark | S2 E043 | 05-15-25

Transcript

Cracks in the Consumer: Retail Sales Miss the Mark | S2 E043 | 05-15-25 · Markets with Megan: A Quick Financial Markets Update

• 0:00
  Megan Horneman: We're starting to see some cracks in the consumer emerge here.
• 0:04
  Megan Horneman: It's Thursday, May the 15th, and this is Markets with Megan.
• 0:08
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• 0:14
  Megan Horneman: But we wanted to detail the report that we got this morning on retail sales for the month of April and this is important because it's the first reading that we've got on the consumer for the second quarter GDP and remember, the consumer is the majority of GDP.
• 0:29
  Megan Horneman: Now, when you look at the report, it wasn't awful.
• 0:33
  Megan Horneman: Some of these indicators came in a little bit better than expected.
• 0:37
  Megan Horneman: At the headline level, it came in at a one-tenth growth rate for the month versus the expectation of it being flat.
• 0:44
  Megan Horneman: When you look at X autos, that came in a bit weaker.
• 0:49
  Megan Horneman: The survey was expecting 0.3% and it came in at 0.1%.
• 0:53
  Megan Horneman: But the one indicator that we focus on is that control group that's going to exclude all of the volatile items like food, energy, gas, building materials, and this has a direct impact input into GDP figures.
• 1:07
  Megan Horneman: That actually declined for the month of April.
• 1:10
  Megan Horneman: The expectation was that it would rise three-tenths but it actually saw a decline and that's the fourth decline we've seen out of the past seven months.
• 1:19
  Megan Horneman: Now let's dig into some of the details that we got from the report and where we're seeing this weakness.
• 1:24
  Megan Horneman: The areas that we saw the biggest weakness were in some discretionary items not all discretionary, but if you look at motor vehicles, they declined.
• 1:32
  Megan Horneman: If you look at clothing, that declined.
• 1:34
  Megan Horneman: Sporting goods that declined.
• 1:37
  Megan Horneman: General merchandise, miscellaneous health and personal care, gasoline that's a good thing because the gasoline prices were lower.
• 1:44
  Megan Horneman: All of these dragged that index lower.
• 1:46
  Megan Horneman: If you look at a couple other true discretionary items, though, you can see furniture, electronics, building materials all of these rose.
• 1:55
  Megan Horneman: Now we can't decipher yet if this is just consumers trying to get ahead of tariffs, because obviously some of these are tariff impacted, but they did see modest increases.
• 2:06
  Megan Horneman: And when you look at eating and drinking, this is a real big discretionary indicator.
• 2:11
  Megan Horneman: Are people still going out to restaurants?
• 2:12
  Megan Horneman: And while it did weaken a bit from the big 3% jump we saw last month, it is still rising.
• 2:20
  Megan Horneman: It's about 1.2%.
• 2:22
  Megan Horneman: So there is some cracks emerging from the consumer standpoint, but not falling off a cliff.
• 2:28
  Megan Horneman: This will be important for the second quarter GDP.
• 2:31
  Megan Horneman: Now markets are starting to price back in the expectation of some Fed rate cuts and that's because we are seeing some of this data soften, especially in the housing market, but there's a lot more information for the Fed to digest before we can decide if the June meeting is on the table.
• 2:48
  Megan Horneman: That's all we have today.
• 2:49
  Megan Horneman: If you want a history of our podcast, you can go to marketswithmegan.
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  Megan Horneman: fm.
• 2:53
  Megan Horneman: Thank you.