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Building Material Sales Add Volatility to Retail Sales

June 11th, 2010 Michael McDonough

Unusual volatility in the sale of building materials has exaggerated retail sales over the past three months.  While this doesn’t change the prevailing trend, sales in both April and March would have appeared far less optimistic than reported.   Building material sales climbed 8.0% in both March and April-a pace not seen since March 2004-plummting -9.3% in May.  In April the surge in building material sales, despite broad-based weakness in most other retail components permitted retail sales index excluding automobiles andgasoline to rise 0.6%. However, as you can see from the attached chart, if you excluded building materials from the index retail sales ex-autos and gas in Aprilwould have fell -0.2%, compared to the reported 0.6% rise.  Using the same parameterssales in May, sales would have risen an anemic 0.1% (still better than the -0.5% decline reported in today’s release).   Reducing the recent volatility caused by building material sales, the trend still points toward a lackluster summer selling season without significant, albeit unlikely, improvements to household balance sheets.

Source: Bloomberg

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