U.S. April retail sales post strongest gain in eight months, but consumer confidence plunges to historic lows.

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US consumer confidence has fallen to historic lows, but actual consumption data tells a completely different story. Retail sales data for April shows that US consumer spending remains resilient, easing market concerns about an economic slowdown.

US retail sales in April rose 0.5% month-on-month, in line with market expectations but higher than Bank of America’s previous forecast. Year-on-year, growth reached 4.9%, the strongest performance in nearly eight months.

Meanwhile, the “control group” retail sales, which are directly included in the GDP calculation, also rose 0.5% month-on-month, better than expected, and March 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 historical lows, actual spending behavior hasn’t shown a corresponding contraction. This split makes investors’ assessments of the US economic fundamentals more complex.

Behind the Surprise: Gas Stations and Online Retail Drive Gains

Looking at the breakdown, gas station sales and non-store (online) retailers were the biggest positive contributors to April’s retail sales. In contrast, motor vehicle and parts sales as well as apparel consumption were the main drags.

Bank of America previously predicted that retail sales in April would pull back after the surge in March. Their logic was that the boost from gasoline spending would diminish, and auto sales would moderate—partly because the earlier Easter brought some seasonal demand forward into March. The “holiday dislocation” effect was also thought likely to suppress post-Easter consumer activity. However, the final data was clearly stronger than the bank’s expectations.

Real Retail Sales: Continuous Rebound from Negative Territory

If we roughly deflate nominal retail sales using the Consumer Price Index (CPI), “real” retail sales have been rebounding continuously since negative readings last December, indicating that consumer spending still has some support after excluding price factors.

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

Divergence Between Confidence and Behavior: Questions Over Data Reliability

The most notable phenomenon now is the widening gap between consumer confidence and actual spending behavior. The University of Michigan’s Consumer Sentiment Index has dropped to a historical low, but retail sales data show consumers are still spending.

This divergence has led some market watchers to question the representativeness of confidence surveys—what types of consumer groups make up the survey sample, and can their sentiment accurately reflect overall behavior? The answer remains unclear. For investors, the ongoing difference between hard and soft data may persist in the current environment, making it a core challenge to weigh the signaling value of both types of indicators when assessing the outlook for the US economy.

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