KEY DATA: Sales: 0%; Excluding Gasoline: +0.1%/ Import Prices: -0.3%; Nonfuel: -0.4%; Exports: -0.7%; Farm: -0.8%

IN A NUTSHELL: “Forget ‘shop ‘till you drop’, let’s just hope consumers simply start shopping!”

WHAT IT MEANS: I assumed it would take some time for households to start spending the “windfall” from the lower energy costs, but this is getting crazy. Retail sales went nowhere in April, which wasn’t a huge surprise given that vehicle sales has slowed somewhat. But when you look at the details of the report, there were few segments where spending picked up. The biggest winner continues to be restaurants. I guess you can say that the few extra dollars and improving confidence is inducing people to eat out again, which is great. The warmer weather brought helped drive strong demand for sporting goods, health care purchases were up and online shopping was solid. But consumers are not buying anything that costs a lot. Electronics stores continue to suffer, as they have for quite a while. Furniture sales fell, though they had been doing better earlier in the year. Gasoline, department store and supermarket sales were also off. Sales for the first four months of the year compared to the same period in 2014 were up only 1.9%, not a great performance.

On the inflation front, there are few reasons Fed members should fear any major increases in prices anytime soon. Import prices decline sharply despite a jump in fuel costs. Indeed, energy was just about the only component that posted a rise. The cost of imported food, consumer goods, capital goods and even industrial supplies excluding petroleum were all up. Vehicle prices were flat. On the export side, agricultural prices are cratering. They are down over 15% from April 2014, which should really hurt farmers’ incomes. Still, except for vehicles, most other export prices were down.

MARKETS AND FED POLICY IMPLICATIONS: Where have all the shoppers gone? Got me. It looks like people are using the modest funds left over from not pumping it into their gas tanks for smaller items – or are actually saving it. Retail sales disappointed in April, especially since the weather was a lot better and people were expected to be out shopping. Does this mean consumer spending will be weak this quarter? Not necessarily. On a non-price adjusted basis, retail sales in April are running at a moderate pace above the first quarter average. Increases in May and June would push that up significantly. Also, these data don’t include services, which is two-thirds spending, so we really cannot count the consumer out just yet. The next retail sales number is released just before the next FOMC meeting, so that report may take on even more importance. But the FOMC doesn’t really have to worry about inflation. Foreign companies are using the strong dollar to push down their prices so they can sell more. Given the weakness in economies around the world, that is smart business. The dollar may have stabilized, but until it falls, the downward pressure emanating from lower import costs will limit domestic firm pricing power. Taken together, this report will likely be read by investors as being positive since it lowers the already low probability that the Fed will hike rates in June.