Is Retail Data Misleading Investors? | S3 E146 | 05-14-26

April's retail sales report came in roughly as expected, but the headline number doesn't tell the whole story. Megan Horneman breaks down what the data actually shows, why the core control group figure matters more than the top line, and why some of that consumer spending may reflect higher prices rather than higher volume.

If you've been watching inflation reports closely, the retail sales data adds an important layer. Spending categories like electronics and restaurants look strong on paper, but both are also seeing price pressures tied to semiconductor supply chains and rising food costs. That context matters for understanding whether consumers are truly spending more, or just paying more.

If you're trying to make sense of what consumers are actually doing and what it means for the broader economy, this episode is worth five minutes of your time. Subscribe so you don't miss the next one.

For a history of all Markets with Megan episodes, visit: https://marketswithmegan.FM

#MarketsWithMegan #RetailSales #ConsumerSpending #Inflation #StockMarket #EconomicData #AIStocks #Cisco #GDP #MeganHorneman

https://youtu.be/uZ4q75cZG30

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Transcript

Consumers Keep Spending

Megan Horneman 0:00

Consumers continue to spend despite all of the outside factors that are straining their budgets. This is uh Thursday, May the 14th, and this is Markets with Megan. If you like this podcast, you can subscribe, hit the alarm bell, share with your friends, family, colleagues, anybody who wants to dig into the economic data that we get on a regular basis and what it means for not only the markets but the economy.

April Retail Sales Report Breakout

Megan Horneman 0:23

And today we got a report on the consumer and their spending patterns. This is the monthly retail sales report for the month of April. And in the month of April, we're here two months into the turmoil that's going on in the Middle East. Gasoline prices still remain very high, but yet retail sales numbers are relatively strong. Now, when we look at this data, the headline numbers came in as expected. It was all due to an increase in gasoline stations, more higher gasoline prices, more spending at gasoline

The Control Group GDP Clue

Megan Horneman 0:54

stations. We did see, though, at the core level, what we call the control group. This is a this is an input into the GDP data that excludes things that are volatile. It excludes food, autos, gas, and building materials. That rose 5.5% for the month, which was a little bit better than expected, but it comes on the back of last month for the month of March when there was a slight upward revision to 0.8%. Now, when we dig into these details where that core spending laid, it was in electronics, sporting goods, internet shopping, and then restaurants. And on a year-over-year basis, this indicator is rising the most we've seen in eight months.

Inflation Versus True Demand

Megan Horneman 1:37

Now, there's a couple things we want to highlight with this report. The most important thing is that this data is not inflation adjusted. And what we mean by that is if the month of April we saw higher prices on things like electronics or sporting goods because of the inflation pressures that are emerging due to the conflict in the Middle East, it won't show up in this data. It's just going to show up as a higher dollar amount. So we don't have a way of really deciphering between what amount of it was because the dollar amount was higher than the last month, and what was true pickup volume in spending on these categories. So we look at this report, the markets tend to really react on this report. Yes, it's positive, consumers are spending, but some of these components, take electronics, for example, we've already talked about that in the inflation reports, that we're seeing an uptick in electronic components in inflation because of semiconductors, and then the bottlenecks and log jam we have in the Strait of Hormouths. So that could be more inflation, more of a flat a factor of inflation than it could be in volume in spending. Same thing goes with restaurants. Is it that food prices is rest in restaurants is higher because we've talked about the fertilizer problem and the really record high numbers we're seeing in some fertilizers, what that means for food prices.

AI Trade Drives The Rally

Megan Horneman 3:02

So the market's taking this as a good report. Equities are higher. Um, it could have something to do with the retail sales, but equities are really higher today just on that AI trade. Again, this market continues to be very heavily focused on just AI. It is there's not a whole lot of breadth in the market, meaning that this is not a broad-based rally. This is really a tech rally. Um, this comes on Cisco, which uh jumped the most in 14 years, and that's because they announced a better sales forecast as well as some restructuring, which unfortunately does um come with some reduction in their workforce. But equities are liking it today, bond yields are also a little bit lower, and oil prices are relatively flat for the day, so it's better than what we've seen recently with big increases in energy prices.

Rates Oil And Quick Wrap

Megan Horneman 3:49

We'll see what that brings for us tomorrow. But that's all we have today. If you like this podcast, you go to marketswithmegan.fm. Thank you.