U.S. retail sales in April posted the strongest increase in 8 months, but consumer confidence fell to a historic low

U.S. consumer confidence has fallen to historic lows, but the actual consumption data tells a very different story. April retail sales data show that U.S. consumer spending remains resilient, easing market concerns about an economic slowdown.

U.S. retail sales rose 0.5% month-on-month in April, matching broadly expected market estimates, but exceeding a prior forecast from U.S. banks. The year-over-year increase was 4.9%, the strongest performance in nearly 8 months.

At the same time, “control group” retail sales—also rising 0.5% month-on-month and directly included in GDP calculations—came in better than expected, and March’s data was also revised upward.

The divergence between the above data and current consumer confidence indicators has drawn market attention. Although consumer confidence surveys show sentiment at historic lows, actual consumer spending has not contracted accordingly. This mismatch makes investors’ assessment of the U.S. economy’s fundamentals increasingly complex.

Beyond expectations: Gas stations and online retail provide a clear boost

Judging from the breakdown data, gas station sales and non-store (online) retailers are the biggest positive contributors to April retail sales. By contrast, sales of motor vehicles and parts, as well as spending on clothing, are the main drags.

U.S. banks had previously forecast that April retail sales would drop after a sharp jump in March. Their reasoning was that the positive lift from gasoline consumption on overall sales would weaken, and auto sales would also turn more moderate—partly because Easter was earlier, bringing some seasonal demand forward to March. The “holiday misalignment” effect was also believed to potentially suppress consumer activity after Easter. However, the finally released data was clearly stronger than their expectations.

Actual retail sales: Continuing to rebound from negative territory

If “real” retail sales are roughly deflated using the Consumer Price Index (CPI), “real” retail sales have continued to rebound since recording negative values in December last year, showing that consumer spending still has some support even after stripping out price factors.

This trend is meaningful for assessing the momentum of the U.S. economy’s real growth. The better-than-expected performance of the control group data and the upward revision to March’s figures suggest that consumers’ contribution to Q2 GDP may be better than previously expected.

A split between confidence and behavior: Questions over data credibility

The most striking development is the steadily widening gap between consumer confidence and actual consumer behavior. The University of Michigan Consumer Confidence Index has fallen to historic lows, yet the retail sales data shows that consumers are still spending continuously.

This divergence has led some market observers to question whether consumer confidence surveys are representative—specifically, which types of consumer groups make up the survey sample, and whether their sentiment can accurately reflect overall consumer behavior. As far as investors are concerned, in the current environment, the discrepancy between “hard” data and “soft” data may persist. How to weigh the signal value of these two types of indicators remains one of the core challenges in judging the direction of the U.S. economy.

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