US: Retail Sales


Wed Nov 15 07:30:00 CST 2017

Consensus Consensus Range Actual Previous Revised
Retail Sales - M/M change 0.1% -0.5% to 0.5% 0.2% 1.6% 1.9%
Retail Sales less autos - M/M change 0.2% -0.1% to 0.5% 0.1% 1.0% 1.2%
Less Autos & Gas - M/M Change 0.4% 0.0% to 0.5% 0.3% 0.5% 0.6%
Control Group – M/M change 0.3% 0.3% to 0.4% 0.3% 0.4% 0.5%

Highlights
Retail sales roughly hit expectations in October, slowing to a 0.2 percent monthly gain following September's revised 1.9 percent hurricane-related surge. Ex-auto sales managed only a 0.1 percent gain though two core readings both show respectable growth, at 0.3 percent each for ex-autos ex-gas and control group sales.

Hurricane effects are evident in autos, slowing sharply to a still very strong 0.7 percent gain from September's 4.6 percent replacement surge. Building materials reversed sharply, down 1.2 percent following a 3.0 percent gain, with gasoline down 1.2 percent vs September's plus 6.4 percent. On the plus side, furniture along with electronics & appliance stores both rose 0.7 percent in October with health & personal care stores up 0.8 percent.

Year-on-year rates did moderate in October but only slightly and remain at respectable levels: total sales are up a yearly 4.6 percent, down 2 tenths in the month, with control group sales at 3.4 percent, also down 2 tenths. Yet the month of October, for retail sales, dims in importance to the holiday months of November and December going into which expectations are very strong for very solid results.

Market Consensus Before Announcement
Auto and gasoline sales both spiked on hurricane effects in September which inflated the month's headline gain to 1.6 percent. But core readings were very positive in the month and underscored the fundamental strength of the consumer. Retail sales in October are expected to rise 0.1 percent with ex-auto sales at 0.2 percent. Two core readings -- less auto & gas and control group sales are both expected to show appreciable gains, at 0.4 percent and 0.3 percent respectively.

Definition
Retail sales measure the total receipts at stores that sell merchandise and related services to final consumers. Sales are by retail and food services stores. Data are collected from the Monthly Retail Trade Survey conducted by the U.S. Bureau of the Census. Essentially, retail sales cover the durables and nondurables portions of consumer spending. Consumer spending typically accounts for about two-thirds of GDP and is therefore a key element in economic growth.



Description
Consumer spending accounts for more than two-thirds of the economy, so if you know how the consumer sector is faring, you'll have a pretty good handle on where the economy is headed. Needless to say, that's a big advantage for investors.

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 becomes excessive 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 auto sales are especially strong or apparel sales are showing exceptional weakness. 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.

Balance was achieved through much of the nineties. For this reason alone, investors in the stock and bond markets enjoyed huge gains during the bull market of the 1990s. Retail sales growth did slow down in tandem with the equity market in 2000 and 2001, but then rebounded at a healthy pace between 2003 and 2005. By 2007, the credit crunch was well underway and starting to undermine growth in consumer spending. Later in 2008 and 2009, the rise in unemployment and loss of income during the recession also cut into retail sales. Spending rebounded in 2010 and 2011 but was constrained by lingering high unemployment.

Importance
Retail sales are a major indicator of consumer spending trends because they account for nearly one-half of total consumer spending and approximately one-third of aggregate economic activity.

Interpretation
Strong retail sales are bearish for the bond market, but favorable for the stock market, particularly retail stocks. Sluggish retail sales could lead to a bond market rally, but will probably be bearish for the stock market.

Retail sales are subject to substantial month-to-month variability. In order to provide a more accurate picture of the consumer spending trend, follow the three-month moving average of the monthly percent changes or the year-over-year percent change. Retail sales are also subject to substantial monthly revisions, which makes it more difficult to discern the underlying trend. This problem underscores the need to monitor the moving average rather than just the latest one month of data.

In an attempt to avoid the more extreme volatility, economists and financial market participants monitor retail sales less autos (actually less auto dealers which include trucks, too.) Motor vehicle sales are excluded not because they are irrelevant, but because they fluctuate more than overall retail sales. In recent years, many analysts consider the core series to be total less autos and less gasoline service station sales. The latter is volatile due to swings in oil and gasoline prices.

Price changes affect the real value of retail sales. Watch for changes in food and energy prices which could affect two large components among nondurable goods stores: food stores and gasoline service stations. Large declines in food or energy prices could lead to declines in store sales which are due to price, not volume. This would mean that real sales were stronger than nominal dollar sales.

Since economic performance depend on real, rather than nominal growth rates, compare the trend growth rate in retail sales to that in the CPI for commodities.