Disappointing April retail sales spell bad news for Q2 GDP

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What happened to retail? It looks sluggish, despite a lot of noise.

April retail sales come in unchanged, below expectations of a 0.2 percent gain.

Remember, this is not a first quarter number. This is second quarter, and retail sales are a significant component of GDP. Look for downward revisions for second quarter GDP.

Read More US retail sales unchanged in April on weak autos, furniture

Bond yields dropped—though later recovered—and the dollar index dropped to its lowest level since February.

Retail Sales are now flat or down four of the last five months.

Retail Sales

  • April: flat
  • March: up 1.1 percent
  • February: down 0.6 percent
  • January: down 0.8 percent
  • December: down 0.9 percent

The pull of Easter spending into March was likely an issue, but what happened to the lower gasoline prices that were supposed to save consumers money?

John Tomlinson at ITG Investment Research notes that gas prices began increasing at the beginning of February, and are up about 25 percent since then. Consumers who live paycheck to paycheck don't notice that gas prices are down year over year, but they do notice how they fluctuate week over week.

Or maybe they were drinking more. Sales at restaurants and bars increased 0.7 percent.

They're definitely ordering online. Receipts at online stores increased 0.8 percent.