Retail sales on Friday will be key - Nomura

Analysts at Nomura noted that retail sales this week will be key for the US data/

Key Quotes:

"Retail sales had a slow start in Q1. Top-line retail sales fell 0.2% m-o-m consecutively in March and February, driven by weak sales at auto and parts dealers and gasoline stations. In March, however, retail sales showed some sign of recovery, with core (“control”) retail sales (excluding autos, gasoline, building material and food services) up strongly by 0.6% m-o-m in March from a 0.3% decline in February. 

Incoming data suggest continued improvement in core retail sales in April. Elevated business sentiment in the nonmanufacturing sector suggests that business activity remained healthy. In particular, the ISM non-manufacturing headline index rebounded to 57.5 in April from 55.2 in March, with broad-based strength in sub-indexes. 

Moreover, we think that recent delays in individual tax refunds may have continued to positively affect the consumer spending in April, as consumers make purchases that they had been holding off. Thus, we forecast that core retail sales were up 0.5% m-o-m in April. For non-core components, we expect a decent pick-up in sales at gasoline stations as national gasoline prices increased notably in April after slower growth in March. 

Despite spring driving season, seasonal increases in retail gasoline prices were slow in March. Moreover, moderate recovery in consumer light vehicle sales in April indicates that sales at motor vehicle and parts dealers likely rebounded modestly after continued slowdown in March. Altogether, we expect top-line retail sales to have increased 0.6% m-o-m. Excluding autos sales, we forecast a 0.6% m-o-m increase."