CA: Retail Sales

Wed Sep 23 07:30:00 CDT 2015

Consensus Actual Previous Revised
Month over Month 0.8% 0.5% 0.6% 0.4%
Year over Year 1.8% 1.4% 1.3%

Retail sales extended their recent positive run to three months with a 0.5 percent rise versus June (revised down to 0.4 percent). The latest increase was on the soft side of expectations but still enough to boost annual sales growth from 1.3 percent to 1.8 percent.

The recovery in nominal demand, which reflected increases in six of the eleven subsectors, was only partially mirrored in volumes which rose a relatively modest 0.2 percent from the end of last quarter and now stand 0.9 percent higher on the year.

The monthly nominal advance came largely courtesy of a 2.0 percent rise in motor vehicle and parts dealers. Indeed, excluding this category purchases were only flat. The other main areas of support were clothing and accessories (2.5 percent), sporting goods, hobby, books and music (1.5 percent) and miscellaneous (0.8 percent). Weakness was most apparent in electronics and appliance stores (minus 1.7 percent), food and drink (minus 0.5 percent) and furniture and home furnishings (minus 0.8 percent).

Notwithstanding disappointing wholesale sales (minus 0.4 percent), solid monthly gains in export volumes (1.0 percent) and manufacturing shipments (1.1 percent) combine with today's retail sales update to suggest a reasonably buoyant start by the economy to the current quarter. Accordingly, speculation about additional BoC easing will probably fade a little more.

Lower interest rates clearly remain a possibility should the apparent bounce in real GDP prove temporary but so far the third quarter looks on course to exceed slightly the central bank's 1.5 percent (saar) forecast. If so, policy could be on hold well into 2016.

Retail sales measure the total receipts at stores that sell durable and nondurable goods.

With consumer spending a large part of the economy, market players continually monitor spending patterns. Data are available both for total retail sales and those excluding autos and for 16 different store specializations. Since autos account for over 25 percent of retail sales, the sector can have a pronounced impact on overall sales given their volatility. Retail sales are used to estimate the goods portion of personal consumer expenditures in the quarterly GDP accounts, accounting for about 50 percent of the total.

The pattern in consumer spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth.

Retail sales not only give you a sense of the big picture, but also the trends among different types of retailers. Perhaps apparel sales are showing exceptional weakness but electronics sales are soaring. These trends from the retail sales data can help you spot specific investment opportunities, without having to wait for a company's quarterly or annual report.