| Consensus | Consensus Range | Actual | Previous | Revised | |
|---|---|---|---|---|---|
| Retail Sales - M/M | 0.3% | 0.3% to 0.4% | 0.4% | 0.4% | 0.8% |
| Ex-Vehicles - M/M | 0.3% | 0.0% to 0.4% | 0.1% | 0.5% | 1.0% |
| Ex-Vehicles & Gas - M/M | 0.4% | 0.3% to 0.5% | 0.1% | 0.7% | 1.2% |
Highlights
The dollar value of retail and food services sales is up 0.4 percent in October after a sizeable upward revision to up 0.8 percent in September. Total sales in October are slightly higher than the consensus of up 0.3 percent in the Econoday survey of forecasters. Much of the strength in the report is due to an increase of 1.6 percent in motor vehicle sales. Motor vehicle sales likely had a strong month in parts as consumers in the Southeast had to replace vehicles ruined in flooding associated with Hurricanes Helene and Milton. Elsewhere, sales pulled back in some categories after a strong performance in the prior month.
Excluding motor vehicles, retail and food sales are up 0.1 percent in October after up 1.0 percent in September. The October rise is below the consensus of up 0.3 percent in the Econoday survey. Sales at gasoline stations are up a scant 0.1 percent in October after falling 0.9 percent. Gasoline prices fell in September and did not rise again in October. Excluding motor vehicles and gasoline, retail and food sales are up 0.1 percent in October after up 1.2 percent in September.
Other categories in October that probably show the impact of the hurricanes are the 2.3 percent rise for electronics and appliances that had to be replaced and up 0.5 percent for building materials for ongoing repairs. Consumers continued to eat out more with sales at restaurants up 0.7 percent in October after up 1.2 percent in September.
Consumers probably filled their immediate needs for back-to-school items in September. Sales at closing stories dip 0.2 percent in October after rising 0.9 percent in September. Sporting goods, hobby, musical instruments, and book store sales fall 1.1 percent in October after up 0.9 percent in September. Nonstore retailers had a 0.3 percent increase in October after a solid up 1.7 percent in September. Nonstore includes online retailers. It is possible that without the Amazon Prime Day sales event that segment would have been weaker as well.
Most categories had upward revisions in September and some back in August. This suggests that the personal consumption component of GDP will be revised higher when the second estimate of third quarter GDP is released at 8:30 ET on Wednesday, November 27.
Excluding motor vehicles, retail and food sales are up 0.1 percent in October after up 1.0 percent in September. The October rise is below the consensus of up 0.3 percent in the Econoday survey. Sales at gasoline stations are up a scant 0.1 percent in October after falling 0.9 percent. Gasoline prices fell in September and did not rise again in October. Excluding motor vehicles and gasoline, retail and food sales are up 0.1 percent in October after up 1.2 percent in September.
Other categories in October that probably show the impact of the hurricanes are the 2.3 percent rise for electronics and appliances that had to be replaced and up 0.5 percent for building materials for ongoing repairs. Consumers continued to eat out more with sales at restaurants up 0.7 percent in October after up 1.2 percent in September.
Consumers probably filled their immediate needs for back-to-school items in September. Sales at closing stories dip 0.2 percent in October after rising 0.9 percent in September. Sporting goods, hobby, musical instruments, and book store sales fall 1.1 percent in October after up 0.9 percent in September. Nonstore retailers had a 0.3 percent increase in October after a solid up 1.7 percent in September. Nonstore includes online retailers. It is possible that without the Amazon Prime Day sales event that segment would have been weaker as well.
Most categories had upward revisions in September and some back in August. This suggests that the personal consumption component of GDP will be revised higher when the second estimate of third quarter GDP is released at 8:30 ET on Wednesday, November 27.
Market Consensus Before Announcement
Auto sales were strong in October while gas sales were soft, with prices down. Forecasts look for a modest 0.3 percent rise in retail sales on the month with sales ex-autos also up 0.3 percent and sales ex-autos and gas up 0.4 percent.
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.
