Retail sales measure the total receipts at stores that sell durable and nondurable goods. Consumer spending accounts for two-thirds of GDP and is therefore a key element in economic growth. Why Investors Care
| Released on 7/15/08 For Jun 2008 | |||||||||||||||||||||||||
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Highlights
Retail sales for June were disappointing with income tax rebate checks apparently going mostly into drivers' gasoline tanks. Overall retail sales posted a modest 0.1 percent in gain in June, following a 0.8 percent boost the month before. The headline number was considerably softer than the market forecast for a 0.5 percent increase. Excluding motor vehicles, retail sales increased a strong 0.8 percent in June, after advancing 1.2 percent the month before. The consensus expectations for ex-auto sales were for a 1.0 percent increase. However, strength was mostly due to higher gasoline prices. When excluding both motor vehicles and gasoline, sales advanced 0.2 percent, after rising 0.8 percent in May.
Indeed, inflation largely led retail sales as the strongest component was gasoline stations with a 4.6 percent boost in June. Food and beverage stores also posted a sizeable increase at 0.7 percent. Other strength was in nonstore retailers and clothing & apparel.
Weakness was led by building materials & garden equipment and by motor vehicles & parts which dropped 0.9 percent and 3.3 percent, respectively.
Overall retail sales on a year-on-year basis in June were up 3.0 percent while excluding motor vehicles, the year-on-year gain came in at up 6.2 percent.
The June retail sales report shows consumers being hard hit by higher gasoline prices and cutting back in other areas. With higher prices underlying much of June's gains, we are likely to see little if any real gain in personal consumption for the month.
Retail sales have been surprisingly strong - perhaps due to government rebate checks. The question is whether consumer spending will continue on this path or start to sag in line with the labor market. Overall retail sales surged 1.0 percent in May, following a 0.4 percent gain in April. Excluding motor vehicles, retail sales continued strong with a 1.2 percent surge in April, after gaining 1.0 percent the month before. When excluding both motor vehicles and gasoline, sales posted a 1.0 percent increase, after rising 1.1 percent in April. Clearly, gasoline sales were strong due to higher prices, but sizeable sales gains were also seen in building materials & garden equipment and in general merchandise. Other increases were widespread as the only major component to decline was miscellaneous store retailers. The second round of rebate checks went out in June and a spike in the May personal saving rate suggests that not all of the rebate checks were spent that month. So, we may see another strong month of sales for June.
Retail sales Consensus Forecast for June 08: +0.5 percent
Range: 0.0 to +1.1 percent
Retail sales excluding motor vehicles Consensus Forecast for June 08: +1.0 percent
Range: +0.4 to +1.6 percent
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Nearly 75 percent of the time, changes in monthly retail sales are between +1 percent and -1 percent. However, there are many months in which the monthly change falls outside that range. Most of the time, excessive increases or decreases are due to higher/lower spending on motor vehicle sales. Year-over-year changes in retail sales can be volatile as well, but tend to be smoother than monthly changes. |
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