Retail sales had spiked in May, then showed only slight growth in June. (Control sales rose 1.2% and 0.2%, respectively, in those months.) The July gains are tamer than those of May, but still show a nice increase. In contrast, when sales spiked in November 2017 (similar to the spike we saw this past May), growth over the subsequent three months, December 2017 through February 2018, was essentially zero. So, sales gains have held up better in the aftermath of the May 2018 spike than was the case six months earlier.
Among store types, July sales gains were especially strong recently at restaurants. Restaurant sales rose 2.8% in May, 1.6% in June, and 1.3% in July. It is worth noting that our control sales measure includes restaurant sales, whereas the control measure cited by most other analysts excludes restaurants, so our numbers show a bit of a better performance. It should also be noted that no retail sector was noticeably weak in July. Even though drug and furniture stores registered sales declines in July, both of these came off sizable gains in preceding months.
Our take has been that consumer spending in general and retail sales (goods consumption) in particular would show modest growth in 2018, comparable to what we saw over 2016-17. Relative to that take, the recent strength in restaurant sales has been especially surprising. Still, even apart from restaurants, sales growth has held up better over the past three months than our forecast would have called for. We’ll see if that better performance continues.