The driver in our economy is the consumer making up 65% to 70% of the economic activity; therefore it is very important to watch the monthly retail sales numbers as that goes directly to the health of the individual’s spending on a monthly basis. There are parts of the report that need to be parsed as gasoline can spike or fall in price on a monthly basis and distort the numbers. Also, large ticket items like buying a new car can do the same. So we also like to see the underlying health of retail sales by excluding transportation and energy from the number.
Overall for May retail sales rose .8%, a very large number, and March and April’s numbers were revised upward. If autos were taken out retail sales goes up to .9%.
There is no other way to interpret the numbers, the economy is getting stronger and inflation is apparently going to start picking up, maybe not in wages, at least not yet, but in goods and services the pressure is starting to build. That is a good thing as long as it is contained.