- U.S. retail sales declined by 0.4% M/M in April.

- Excluding autos, sales were also weak, falling by 0.5% M/M.

- On balance, the report was fairly disappointing and suggests that U.S. consumers are shying away from malls.

U.S. retail sales declined for the second straight month in April, falling by 0.4% M/M, following the 1.3% M/M drop the month before (previously reported as -1.1% M/M). This was noticeably worse than the market consensus for a flat print on the month. Excluding autos, sales were down 0.5% M/M, and were also softer than the market expectations for a 0.3% M/M rise. Core retail sales, which net out sales of autos and gasoline, declined by a more modest 0.3% M/M during the month. On a year ago basis, sales continue to be quite poor, as total retail sales have declined by a fairly big 10.1% since April last year. This is the eighth straight month in which sales have fallen below their year-ago level.

The details of the report were quite weak, as the declines in sales were fairly broadly-based, with 8 of 13 spending categories down. There were big drops in the sale of electronics (down 2.8% M/M), gasoline (down 2.3%M/M), food (down 1.0% M/M) and at department stores (down 0.2% M/M). On the other hand, sales of health and personal care products (up 0.4% M/M), building materials (up 0.3% M/M), and motor vehicles (up 0.2% M/M) were higher.

The crux of this report appears to be that the positive momentum seen in U.S. consumer spending in the first few months of this year has stalled. Indeed, despite the resurgence in the level of consumer confidence over the past few months, U.S. consumer spending seems to be buckling under the weight of the worsening labour market conditions and weakening economy. Nevertheless, we remain hopeful that the impact of rising equity markets plus the massive fiscal stimulus package, which is likely to start kicking in this quarter, will breathe new life into personal expenditures in the near term, thereby providing some much needed boost to U.S. economic activity.