Retail Sales

Widespread Spending Gains, While
Moderate, Highlight Shoppers' Resilience  

Consecutive months of broad growth encouraging. Households increased their spending across a broad spectrum of stores in May, supporting a 0.4 percent rise in core retail sales. For the second straight month, eight categories registered sales growth, a testament to consumers’ spending power. The addition of 339,000 new jobs last month, the most since January, played a role in aiding households' purchasing power. A 4 percent rise in headline CPI inflation, the lowest annual rate of increase in more than two years, is also lifting consumer sentiment. Moving forward, easing inflationary pressures and a still-tight labor market bode well for single- and multi-tenant property performance, driving demand for what is a historically limited volume of available space.   

Health and convenience remain a priority for shoppers. Amid warmer weather and a slowdown in single-family home sales, more owners upgraded their existing residences last month. This activity supported a 2.2 percent increase in building and gardening materials spending. While this was the largest gain noted across retail categories, several other segments shined. Online sales reached a record mark, with health and personal care-related spending up 7.8 percent year-over-year. The latter is the only segment to notch positive sales momentum in each of the past five months. The performance of the health segment bodes well for drug store fundamentals at a time of low-2 percent vacancy.