Consumers Spending Outlook Brightens In May

June 11, 2014

Consumer spending in May increased 4.2%, with the retail sector enjoying new vigor.  The spending increase of 4.2% compared to 4.1% in April.

Retail spending growth of 1.7% marked a slight uptick compared to April's growth of 1.3% as warmer weather across most regions, with the exception of the Northeast, supported retail foot traffic.  Although the 1.7% increase lagged the total spending figure, May marked the strongest growth in seven months, primarily driven by spending at building material and supply dealers (6.7% in May vs. 3.6% in April) and furniture and home furnishings merchants (1.4% in May vs. -0.7% in April).  Average ticket growth of 1.2% in May gained steam against April's 0.5% growth, driven by higher year-over-year gas prices, higher food prices and an increase in some leisure-related categories.

A number of factors, including normalized weather, pent-up demand, falling unemployment and rising home prices supported consumers' willingness to spend in May.  Credit card spending growth continued to be strong and led all other payment types.  The surge in spending growth at hotel and travel merchants, building material and home furnishing merchants, where credit is the primary payment tool, was a major driver supported by easing lending standards and payroll growth.

Other areas of growth included hotel spending growth of 9.3%, a 12 month high, compared to April's 7%.  Gas station spending growth of 3.6% was higher compared to April's growth of 3.3% and was another key supporting factor in overall growth as gas prices remained elevated versus last year.

Source: Retailing Today