US: Headline retail sales may have posted another flat reading in August - RBS

Research Team at RBS, suggests that after a sluggish report in July, headline retail sales may have posted another flat reading in August.

Key Quotes

“However, the weakness was likely concentrated in autos. After jumping to a 17.8 million unit annualized selling rate in July (the highest since November 2015), the selling pace fell in August to 16.9 million units. While the August selling rate was hardly weak, the month-over-month decline still may have shaved about 0.3 percentage points from the headline retail sales change.

Meanwhile, prices at the pump were little changed on a seasonally-adjusted basis, suggesting that expenditures on gasoline may have been roughly steady in the month. Excluding autos and gas, retail sales may have increased by a trend-like 0.3% in August, with the composition of outlays mixed. Sales of apparel may reveal the strength of the back-to-school shopping season (considered an early barometer for the all-important holiday shopping season), although in recent years, more of these expenditures have been pushed into September, as kids wait to see what others are wearing before making purchases.

The unusually hot weather also may have played a role in delaying sales of fall apparel. Anecdotal reports on apparel/general merchandise sales in August have been mixed. The Redbook noted that sales in the month were “likely helped by a better-than-expected back-to-school season.” However, the latest edition of the Fed’s Beige Book, which reflected conditions through most of August, warned that contacts “expected growth in back-to-school sales to be much slower than last year.”

Also, in the latest ISM non-manufacturing survey (which showed a sharp deterioration in August), retailers mentioned that “the business environment has softened a bit over the last month.” Away from apparel and general merchandise, moderate increases may have been seen in other areas, particularly the food and beverage category, which posted a relatively hefty 0.6% decline in July. In any case, even with weak July results and an expected mixed performance in August, real consumer spending in the third quarter may remain on a better-than-3% growth trajectory (following a robust 4.4% annualized rise in Q2), benefiting statistically from the strength of sales in June.”