(Click on image to enlarge)

Mixed results from the latest release of retail sales data. Total sales in April came in better than expected at $724.1 billion, a gain of 0.1% for the month, and a new record high.

(Click on image to enlarge)

Core sales (which excludes autos which can be volatile) also increase 0.1% in April, and a new record high. But the street was expecting a gain of 0.3%.

(Click on image to enlarge)

Only 5 of 13 retail categories increased in April, but surprisingly it was food services & drinking places (AKA bars & restaurants) that led with a 1.2% gain. Usually when consumers are scared and pulling back, discretionary items like eating out are the first ones to get cut back.

The other categories that showed gains can be attributed to the tariff uncertainty (especially building materials).

Over the last 12 months, total retail sales are up 5.2% while core sales are up 4.2%. Normally that is a pretty solid position however…

(Click on image to enlarge)

When we actually adjust sales for inflation, the results are quite different. Real retail sales (chart above) is down 1% since April 2021, compared to total retail sales being up 19% during that same time frame. Regular readers know I’ve been highlighting this for a long time. What this means is that demand has not changed in years, we are just paying higher prices for the same amount of goods.

Luckily spending on services has kept the economy afloat. Wages have been rising above the rate of inflation, and so far employment hasn’t contracted. Until this changes, its hard to envision a protracted recession, although the slowdown is real.

The market resilience continues to amaze. The S&P 500 (SPY) and Nasdaq 100 (QQQ) don’t have any visible resistance levels remaining before retesting record highs. The Russell 2000 small caps (IWM) continues to lag, the next notable resistance level come in around the $215 area.

I still don’t understand it but not going to fight it. We didn’t get anything meaningful so far, and we are worse off than we were at the beginning of the year. Meanwhile valuations are beyond stretched. Be careful out there.

More By This Author: