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 9/12/08 For Aug 2008 | |||||||||||||||||||||||||
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Highlights
The weak jobs market is pulling back consumer spending as retail sales fell for a second straight month, down 0.3 percent in August vs. a downwardly 0.5 percent drop in July (-0.1 previously reported). The August number was far worse than the market projection for a 0.3 percent gain.
Outside of vehicle sales, which were strong due to GM incentives, August sales showed wide declines: electronics -1.3 percent, building materials -2.2 percent, general merchandise -0.2 percent, non-store retailers -2.3 percent. Gasoline sales, reflecting lower prices and soft demand, fell 2.5 percent. Autos did jump, up 1.9 percent to limit the overall damage in August.
Excluding autos, sales plunged 0.7 percent, a very low reading for this category. The consensus had expected a 0.2 percent dip in ex auto sales. Excluding both autos and gasoline, retail sales still were notably negative, falling 0.4 percent after rising by the same amount in July.
Overall retail sales on a year-on-year basis in August were up 1.6 percent - down from 2.1 percent in July. Excluding motor vehicles, the year-on-year gain came in at up 5.5 percent while excluding motor vehicles and gasoline, the year-ago increase stood at 5.9 percent.
Treasury yields and the dollar moved lower in immediate reaction to this report and a big headline drop in the PPI. But the bottom line is that the consumer sector is running out of steam. Today's report adds to the argument that Q3 will be flat. Equities likely will be soft - especially in the consumer discretionary sector.
Retail sales in July were modestly healthy outside of autos, which declined. Overall retail sales slipped 0.1 percent in July, following a 0.3 percent rise the month before. Excluding motor vehicles, retail sales posted a moderate 0.4 percent gain in July, after a 0.9 surge in June. Higher gasoline sales were one of the stronger components, but other components were still positive overall. When excluding both motor vehicles and gasoline, sales rose 0.3 percent, after increasing 0.4 percent the month before. Looking ahead, there are cross currents for the headline number. The auto component will likely be up due to a surge in unit new motor vehicles in August. However, a decline in gasoline prices will be pushing down on overall sales. Outside of these two major components, weekly store sales indicate soft numbers.
Retail sales Consensus Forecast for August 08: +0.3 percent
Range: -0.2 to +1.1 percent
Retail sales excluding motor vehicles Consensus Forecast for August 08: -0.2 percent
Range: -0.5 to +0.2 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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