CA: Retail Sales

Fri Mar 18 07:30:00 CDT 2016

Consensus Actual Previous Revised
Month over Month 0.8% 2.1% -2.2% -2.1%
Year over Year 6.4% 2.6% 2.7%

Retail sales began 2016 on a decidedly upbeat note. Following a marginally shallower revised 2.1 percent monthly nosedive in December, sales rebounded with an offsetting and much stronger than expected 2.1 percent jump in January. This was their steepest increase since March 2010. Annual growth was 6.4 percent, up sharply from the 2.7 percent year-end rate in part due to strongly positive base effects (sales slumped 1.4 percent on the month in January 2015).

Prices were flat on the month so the headline rise in purchases was fully reflected in volume sales.

The overall nominal monthly rise was led by motor vehicles and parts (4.8 percent) but there were also solid gains in general merchandise (4.9 percent), building material and garden equipment (3.0 percent) and clothing (1.2 percent). Excluding the auto sector, sales rose a very respectable 1.2 percent. Weakness was largely confined to gasoline (minus 1.6 percent), where falling prices was a major factor, and home furnishings (also minus 1.6 percent).

January's bounce puts cash sales some 1.2 percent above their fourth quarter average. Moreover, with solid gains already reported in real manufacturing sales and merchandise goods export volumes, its looks as if the economy picked up some genuine momentum around the turn of the year. Certainly the central bank's modest 1.0 percent (saar) first quarter growth forecast now looks far too pessimistic. As such, the likelihood of BoC policy remaining on hold, quite possibly throughout the rest of the year, has just got a little higher.

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.