Soft is the assessment for the latest retail sales report which shows early Hurricane effects for some components and also downward revisions to prior months. Headline sales fell 0.2 percent which is near Econoday's low estimate with ex-auto sales up 0.2 percent and just below the low estimate. The Commerce Department could not isolate the impact of Hurricane Harvey's late month hit on Houston but weakness in auto sales, which fell 1.6 percent, and strength at gasoline stations, up 2.5 percent on higher prices, do hint at such an impact.
There are not many signs of fundamental strength in August though restaurants did rise 0.3 percent with furniture up 0.4 percent and general merchandise making the plus column at 0.2 percent. Otherwise, give back is apparent in nonstore retailers, which have been very strong but fell 1.1 percent in August, and also building materials, down 0.5 percent after two sharp prior gains. Apparel is also weak, down 1.0 percent but again following solid gains.
Turning back to revisions, they also include a 4 tenths downgrade to June's headline from a 0.3 percent gain to a 0.1 percent decline. But core readings show less revision with ex-auto ex-gas unrevised for July though revised lower for June, down 4 tenths to minus 0.1 percent, and with control group sales also unrevised in July but revised down 3 tenths in June to a 0.1 percent gain. Nevertheless, the ex-auto ex-gas reading for August, at minus 0.1 percent, is telling as it excludes the two components that are most likely to take initial hits from the hurricanes.
This report scales back what had been an accelerating pivot higher for consumer spending which nevertheless remains on course as a contributor to third-quarter GDP. Yet the effects of Harvey, and also of course Hurricane Irma, still have to play out making September's consumer spending results a difficult call.
Recent History Of This Indicator
Unit auto sales, held down in part by Hurricane Harvey, proved very weak in August and are holding down the consensus for retail sales which are expected to increase only 0.1 percent in what would be a fraction of July's very strong 0.6 percent gain. But when excluding autos, the consensus moves up sharply to a 0.5 percent increase to match July's gain. Two other readings -- less autos & gas and control group sales -- rose 0.5 and 0.6 percent with forecasters looking for gains of 0.3 percent for both in August. Harvey effects at month end are possible with losses in durable purchases balanced against gains for basic supplies. The August results and any revisions to July will put two major pieces of third-quarter GDP in place.