Retail Sales Report – Decent Retail Sales Growth
The September retail sales report was controversial in that both the bulls and the bears used it to support their narratives.
With stocks falling on Monday, the bears were gaining confidence and ready to declare another victory. I disagree with the bears. I think this was a continuation of the solid trend this year, making it good news.
Retail Sales Report – The Negative View
Let’s first review the bearish argument and then get into my opinion. Out 66 economists who made estimates for this retail sales report, all had growth coming in higher than it did.
Overall retail sales growth was 0.1% month over month which missed the consensus for 0.6%. Growth was the same as August.
There was a sharp deceleration on a year over year basis as growth fell from 6.5% to 4.7% which is the lowest growth rate since February.
As you can see from the chart below, the 3 month average of year over year overall retail sales growth was 5.94%. This is the first deceleration in 6 months.
It’s still one of the strongest 3-month average growth rates of this expansion. That is, outside of the reports following the recession which had very easy comparisons.
Real retail sales growth is 2.4% which is below the expansion average of 2.7%. It could have been way worse if inflation would have improved.
Retail sales excluding autos were down 0.1% month over month. Retail sales without autos and gas were flat. Both missed estimates for 0.4% growth. I think real retail sales will easily recover later in the year once the effects from hurricanes are gone.
Retail Sales Report – The Optimistic View
That brings us to the optimistic analysis of this report.
Hurricane Florence impacted these results. Unfortunately, hurricane Michael will affect October’s results. This means we won’t have data on retail sales unaffected by hurricanes until November. That includes the holiday shopping season. My baseline expectation will be positive until the labor market shows signs of weakness.
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