Synopsis:
Morgan Stanley and Goldman Sachs both expect a sharp decline in May headline US retail sales, driven by weak auto volumes and falling gas prices. However, both anticipate modest strength in core categories, supported by firm labor income and stable card spending data.

Key Points:

Headline Retail Sales (Both MS & GS: -0.7% m/m):

• A sharp decline is expected due to:

  • Weak auto sales volumes

  • Lower gasoline prices impacting nominal gas station sales

• Both banks highlight autos as the main drag on the headline print.

Core and Control Group Sales:

• Morgan Stanley:

  • Control group sales (used for GDP) seen rising +0.3% m/m.

  • Restaurant sales expected to decelerate but remain positive (+0.2%).

• Goldman Sachs:

  • Core retail sales (ex-autos, gas, building materials): +0.2%

  • Retail sales ex-auto: +0.2%

  • Retail sales ex-auto & gas: +0.2%

  • Rebound in core supported by card spending metrics.

Macro Implications:

• MS emphasizes that labor income strength still supports consumption even as transactional data softens.

• GS sees the auto sales slump as a temporary drag, not reflective of broader consumer weakness.

Conclusion:

Both Morgan Stanley and Goldman Sachs expect a sharp headline retail sales decline in May, driven by autos and gasoline. However, underlying demand remains intact, with modest growth in the core categories. The data should support the narrative of a cooling but not collapsing consumer sector—reinforcing the Fed’s cautious, data-dependent stance heading into the summer.