| Consensus | Consensus Range | Actual | Previous | Revised | |
|---|---|---|---|---|---|
| Retail Sales - M/M | 0.4% | -0.2% to 0.5% | 0.7% | 0.6% | 0.9% |
| Ex-Vehicles - M/M | 0.5% | 0.2% to 0.9% | 1.1% | 0.3% | 0.6% |
| Ex-Vehicles & Gas - M/M | 0.3% | 0.0% to 0.5% | 1.0% | 0.3% | 0.5% |
Highlights
Retail and food services sales are up 0.7 percent in March after a sizeable upward revision to up 0.9 percent im February. The increase is well above the consensus of up 0.4 percent in the Econoday survey. Although there was some drag from a 0.7 percent decline in motor vehicle sales, there are enough gains elsewhere to support solid retail spending.
Retail and food services sales excluding motor vehicles is up 1.1 percent in March and revised higher to up 0.6 percent in February. The increase is above the consensus up 0.5 percent in the Econoday survey. Sales excluding motor vehicles and gasoline are up 1.0 percent in March and revised upward to up 0.5 percent in February. Sales at gasoline stations are up 2.1 percent and likely reflect both somewhat higher prices and a higher volume of sales during a busy travel period with spring break at schools and the Easter observance.
While sales declined 0.9 percent in January, the substantial upward revisions in February and solid overall performance in March suggest that personal consumption expenditures for first quarter GDP will maintain the momentum that has kept economic growth above expectations for more than a year.
In addition to the hefty increase in gasoline sales which account for 7.7 percent of the dollar value of retail, there is a gain of 2.7 percent in nonstore retailers which account for 17.3 percent of all retail spending in March. Sales at general merchandise stores are up 1.1 percent and have a 10.6 percent share of the total. Spending at restaurants and bars is up 0.4 percent and accounts for 13.2 percent of sales in March. Sales at miscellaneous store retailers are up 2.1 percent, but only account for 2.3 percent of the sales total. There are smaller increases of 0.5 percent for food and beverage stores, and 0.7 percent for building materials and garden supply stores. These more than offset sales declines of 1.8 percent in sporting goods, 1.6 percent in clothing, 1.2 percent in electronic and appliances, and 0.3 percent in furniture.
Retail and food services sales excluding motor vehicles is up 1.1 percent in March and revised higher to up 0.6 percent in February. The increase is above the consensus up 0.5 percent in the Econoday survey. Sales excluding motor vehicles and gasoline are up 1.0 percent in March and revised upward to up 0.5 percent in February. Sales at gasoline stations are up 2.1 percent and likely reflect both somewhat higher prices and a higher volume of sales during a busy travel period with spring break at schools and the Easter observance.
While sales declined 0.9 percent in January, the substantial upward revisions in February and solid overall performance in March suggest that personal consumption expenditures for first quarter GDP will maintain the momentum that has kept economic growth above expectations for more than a year.
In addition to the hefty increase in gasoline sales which account for 7.7 percent of the dollar value of retail, there is a gain of 2.7 percent in nonstore retailers which account for 17.3 percent of all retail spending in March. Sales at general merchandise stores are up 1.1 percent and have a 10.6 percent share of the total. Spending at restaurants and bars is up 0.4 percent and accounts for 13.2 percent of sales in March. Sales at miscellaneous store retailers are up 2.1 percent, but only account for 2.3 percent of the sales total. There are smaller increases of 0.5 percent for food and beverage stores, and 0.7 percent for building materials and garden supply stores. These more than offset sales declines of 1.8 percent in sporting goods, 1.6 percent in clothing, 1.2 percent in electronic and appliances, and 0.3 percent in furniture.
Market Consensus Before Announcement
March sales are expected to rise 0.4 percent versus February's nearly as-expected and very solid gain of 0.6 percent. February's ex-auto sales rose 0.3 percent with March expected at plus 0.5 percent; March ex-auto ex-gas are expected at an 0.3 percent gain.
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. Of special attention is the control group; this is an input into the consumer spending component of GDP and excludes food services, autos, gasoline and building materials.
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. The control group for retail sales (which excludes restaurants, vehicles, gasoline and building materials) is an input into GDP and offers a narrower look at nondiscretionary spending.
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.
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. The control group for retail sales (which excludes restaurants, vehicles, gasoline and building materials) is an input into GDP and offers a narrower look at nondiscretionary spending.
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.
