Retail Sales

August 12th, 2016 10:11 am | by John Jansen |

Via TDSecurities:
US: July Retail Sales Miss Leaves Growth Momentum on a Downbeat Note

*        July headline and core retail sales were unchanged, indicating a weak footing at the start of the third quarter following on the heels of upward revisions to June. TD and consensus expectations looked for a stronger July advance across the headline and core figures. June retail sales revised higher to a 0.8% advance in the headline vs 0.6% previously reported, though core sales were unrevised.

*        Taken together, the July retail sales report indicate a weaker-than-expected handoff to Q3 consumer spending, leaving the pace of growth momentum in the second half of this year on a more downbeat note. However, the overall fundamental picture for the consumer remains bright, consistent with a solid rebound in subsequent months. But in any case, the report warrants the Fed to stick to their patient stance over the near-term as Committee members are likely to desire additional data on the resilience of the consumer later in the quarter.

Retail sales were unchanged in July, reflecting sharp declines in gasoline stations, sporting goods and food/beverage store sales offset by solid advances for motor vehicle sales and nonstore retailers. Motor vehicle sales rose 1.1% m/m as presaged by the bounce in light-weight vehicle sales which hit a near post-crisis record of 17.8m annualized rate in July. Excluding autos, retail sales fell 0.3% m/m as lower gasoline prices weighed on gasoline station sales receipts (which fell a sharp 2.7% m/m). The building materials component also contributed negatively with a 0.5% drop.

The remaining categories saw broad-based gains offset by a few offsetting increases, resulting in flat core (excluding autos, gas, building materials) sales print. Sporting goods (-2.2%) and food/beverage store (-0.6%) sales saw the sharpest declines with more moderate declines seen electronics/appliances and general merchandise and food and drinking places. Offsetting increases were recorded for furniture/home furnishings, health/personal care and nonstore retailers. The latter component, which measures online purchases, rose a strong 1.3% m/m and is up 14.1% y/y, as consumers continue to shift their spending habits away from traditional brick and mortar establishments and toward online shopping.

The July figures indicate a weak footing for consumer spending into the third quarter following a robust Q2, leaving growth momentum into the second half of this year on a more downbeat tone. However, the overall fundamental picture for the consumer remains bright, underpinned by resilient levels of consumer sentiment, sustained job growth and falling labor market slack, and steady acceleration in wage growth. This suggests that a solid rebound in subsequent months remains in the cards though the Fed will likely want to see evidence of this before continuing with rate normalization.

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