Consumption accounts for 2/3 of the US GDP, serving as an important engine for the country's economic growth. After an unexpected slowdown in April, will May exceed expectations?
At 8:30 pm Beijing time tonight, the US Department of Commerce will release retail sales data for May. Bank of America expects core retail sales in May to be twice the market consensus.
In its latest report, Bank of America pointed out:
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Based on aggregated data from bank customer debit and credit cards (an indicator that missed last month but has been relatively accurate over the past year), total US household credit card spending in May increased by 0.7% year-on-year, with a 0.9% month-on-month decline after seasonal adjustment. In April, household credit card spending surged by 1.3%, while it decreased by 0.7% in March.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/0003ed00-9f18-4887-b1f1-2e745bd78148.jpeg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/0003ed00-9f18-4887-b1f1-2e745bd78148.jpeg"/>
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Bank of America attributes these fluctuations to seasonal disturbances caused by an earlier Easter this year. Bank of America economist Aditya Bhave stated:
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In the past 5 months, 4 months of retail sales data have been affected by seasonal factors. Credit card consumption data from Bank of America is usually particularly low on Easter day, typically in April, but this year Easter fell on March 31.
However, seasonal adjustment factors cannot fully reflect this change. Spending levels in March were seasonally adjusted to be low, while in April they were high. We believe that the softening of spending growth in May is due to unfavorable base effects.
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Nevertheless, Bank of America still predicts that the core retail sales growth rate in May may be twice the consensus expectation.
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Bank of America expects a 0.3% month-on-month increase in retail sales in May, with a 0.3% month-on-month increase in retail sales excluding automobiles. Core retail sales (excluding automobiles, gasoline, building materials, and food services) are expected to increase by 0.6%.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/b76b037a-2a90-420f-b194-fa78ecef7fa2.jpeg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/b76b037a-2a90-420f-b194-fa78ecef7fa2.jpeg"/>
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Another variable is that retail sales data released this year often undergo significant revisions, some upwards (such as in March) and some downwards (such as in January, February, and April). Bank of America pointed out:
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This risk may persist, especially in downward revisions. If other conditions remain the same, revisions to retail sales data from previous months will impact the month-on-month growth rate in May.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/bf29a258-f43a-412e-a02e-9b9bc6951f34.jpeg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/bf29a258-f43a-412e-a02e-9b9bc6951f34.jpeg"/>
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Bank of America also mentioned that consumer spending in the Northeastern region of the US increased again during the Easter holiday, although not as much as in 2019, reflecting a potential economic recovery in the region. Meanwhile, consumer spending growth in other regions is not as strong as in 2019
In addition, Bank of America also pointed out that after experiencing severe fluctuations before and after the epidemic, as of May 2023, the proportion of disposable income that American consumers can freely allocate in total expenditure has basically returned to the pre-epidemic level

Bank of America predicts based on aggregated customer debit and credit card data that core retail sales will increase by 0.6% month-on-month in May, which is twice the market's general consensus expectation

1. Core Descriptive Facts:
- Consumer spending accounts for about 2/3 of the US GDP.
- In April, consumer spending unexpectedly slowed down.
- The US Department of Commerce will release May retail sales data at 20:30 Beijing time.
- Bank of America Merrill Lynch (BofA) predicts that May core retail sales will be double the market consensus.
- BofA's analysis is based on aggregated data from bank clients' debit and credit cards.
2. Views and Supporting Logic:
- BofA attributes the fluctuations in consumer spending to seasonal disturbances caused by an early Easter this year.
- BofA's economist, Aditya Bhave, explains that the seasonal adjustment factors do not fully reflect the changes in spending patterns, leading to unfavorable base effects in May.
- Despite this, BofA predicts that core retail sales growth in May could be twice the consensus expectation.
- BofA forecasts a 0.3% month-on-month increase in retail sales in May, with core retail sales (excluding certain categories) expected to grow by 0.6%.
- BofA notes the significant revisions often seen in retail sales data, which could impact May's growth rate.
- BofA highlights increased consumer spending in the US Northeast during the Easter holiday, indicating potential economic recovery in that region compared to other areas.
- BofA also mentions that by May 2023, US consumers' discretionary spending as a proportion of total spending has largely returned to pre-pandemic levels after experiencing drastic fluctuations.

Last month's "leading indicator" mishap, Bank of America is very optimistic. Will tonight's U.S. retail sales exceed expectations?