U.S. Retail Figures Down In May But Rebound Expected, Says RBC Economics

Washington, DC - Data released today by the U.S. Commerce Department showed retail sales declined more than expected in May, pulled down by weaker sales at gas stations, clothing stores, department stores, non-store retailers and a larger-than-expected decline in auto sales.

U.S. retail sales fell by half a percent, while sales excluding autos declined by 0.2 per cent, and core retail sales that exclude both autos and gasoline were flat. "Much of the weakness in consumer spending over the month was related to falling gas prices and the lifting of auto dealer incentives, but seasonal adjustment factors also played havoc with the numbers," said Craig Wright, vice president and chief economist at RBC Financial Group.

Other data released on Friday indicates a rebound in consumer confidence in June, suggesting stronger retail sales numbers lie ahead. According to the latest RBC CASH (Consumer Attitudes and Spending by Household) Index released on Friday, one-third (33 per cent) of survey respondents reported increased comfort making a major purchase, such as a home, today as compared to six months ago. A similar number (39 per cent) said they are more comfortable today about making less costly purchases, namely household items. As well, 37 per cent of respondents rated their personal financial situation in general will be stronger in six months than it is today.

According to Wright, "The rebound posted in the RBC CASH index during June is one factor suggesting retail spending could very well recover this month. Our view is that household finances are generally healthy, and employment and income conditions should stimulate spending activity in the months ahead. Modest increases in interest rates are also expected."

In other RBC CASH Index survey findings, strengthening consumer confidence in current economic conditions, and job security, moved the Index to 84, a noteworthy increase from the 18-month low score of 78.2 reported in May. The CASH Index, conducted by Ipsos Public Affairs for RBC, is a monthly national survey of consumer attitudes on the current and future state of local economies, personal financial situations, savings, and confidence to make large investments. The index is benchmarked to the 100 reading assigned in January 2002, when the Index was first introduced.

For more information on this press release, please contact: Brian R. Scanlon Ipsos Public Affairs Washington, DC 202.463.2146

Craig Wright Chief Economist RBC Financial Group 416.974.7457

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