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September 15, 2016 | Retail Sales Unexpectedly Dip 0.3% – Weakness Not Contained to Autos

Mike 'Mish' Shedlock

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

The Bloomberg Econoday consensus for retail sales was a modest +0.0% but consumers could not even muster that. Estimates ranged from -0.3% to +0.2% so one economist did get the story correct.

Highlights

After spending heavily in the second quarter, the consumer has stepped back so far in the third quarter. Retail sales, after inching up a revised 0.1 percent in July, fell 0.3 percent in August and do not just reflect expected weakness in auto sales. Excluding autos, sales slipped 0.1 percent while excluding both autos and gasoline, which is an important core reading, sales also fell 0.1 percent which is the second straight decline.

Details show special weakness for building materials and garden equipment, down 1.4 percent for what is also a second straight decline. This specific reading will lower estimates for the residential investment component of the third quarter GDP report. Non-store retailers, which were flying high in prior months, fell 0.3 percent to underscore the month’s disappointment. Motor vehicles fell 0.9 percent in the month though this does follow a 1.7 percent gain in July.

This report puts the backs of the policy hawks at the Fed to the wall, confirming other signs that the third quarter may not prove that strong after all.

Recent History

Retail sales, which during the second quarter proved very strong and broadly based, slowed sharply in July when total sales came in unchanged with ex-auto ex-gas sales down 0.1 percent. If not for autos which were strong, sales in July were clearly negative, at minus 0.3 percent for the ex-auto reading. Auto sales for August, based on unit sales reported by manufacturers, fell sharply from July in what is a clearly negative signal for the August retail sales report.

Retail Sales

retail-sales-2016-09a

Hard to Spin

It was difficult if not impossible to spin this positive. The Econoday robot did not even try.

Mike “Mish” Shedlock

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September 15th, 2016

Posted In: Mish Talk

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