CA: Retail Sales

Thu Nov 23 07:30:00 CST 2017

Consensus Actual Previous Revised
Month over Month 0.9% 0.1% -0.3% -0.1%
Year over Year 6.2% 6.9% 7.1%

Following a poor, albeit slightly stronger revised, August retail sales rebounded in September. However, a minimal 0.1 percent monthly rise was much less than expected and saw annual growth of purchases slide from 7.1 percent to 6.2 percent. Excluding autos, sales were up 0.3 percent on the month.

In fact, the headline data were even weaker than first appearances suggest as the nominal monthly gain was wholly attributable to prices. Ominously, volumes declined 0.6 percent.

September's meagre monthly rise in cash sales reflected increases in five of the eleven reporting subsectors. Gasoline stations (2.6 percent) led the way on the back of increased charges followed by building material and garden equipment and supplies dealers (2.6 percent). Furniture and home furnishings stores (2.3 percent) also had a good month. However, a near-complete offset was provided by clothing and clothing accessories (minus 2.8 percent), electronics and appliances (minus 1.3 percent), sporting goods, hobby, book and music stores (minus 1.5 percent) and miscellaneous stores (minus 2.4 percent). Motor vehicle and parts were off 0.5 percent.

Today's data put third quarter retail sales just 0.5 percent above their level in the second quarter when they rose fully 1.4 percent versus January-March. This does not bode well for GDP growth last quarter and with some other signals also less than positive (September wholesale sales volumes fell a monthly 1.1 percent), only a relatively modest pick-up in total output now seems likely.

Retail sales measure the total receipts at stores that sell durable and nondurable goods. The headline data are reported in cash terms and disaggregated into eleven main subsectors. Aggregate volume figures are also provided.

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.