U.S. Retail Sales Climb 0.1% vs 0.4% Expected In August

by Ike Obudulu Posted on September 14th, 2018

Washington, D.C., USA: Advance estimates of U.S. retail and food services sales for August 2018, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $509.0 billion, an increase of 0.1 percent (±0.4 percent)* from the previous month, and 6.6 percent (±0.5 percent) above August 2017.

A median survey of economists forecast retail sales to rise 0.4% month-on-month in August

Total sales for the June 2018 through August 2018 period were up 6.5 percent (±0.5 percent) from the same period a year ago. The June 2018 to July 2018 percent change was revised from up 0.5 percent (±0.4 percent) to up 0.7 percent (±0.2 percent).

Retail trade sales were up 0.1 percent (±0.5 percent)* from July 2018, and 6.2 percent (±0.5 percent) above last year. Gasoline Stations were up 20.3 percent (±1.6 percent) from August 2017, while Nonstore Retailers were up 10.4 percent (±1.4 percent) from last year.

Retail Sales Also Called Advance Retail Sales

The U.S. Census Bureau conducts the Advance Monthly Retail Trade and Food Services Survey to provide an early estimate of monthly sales by kind of business for retail and food service firms located in the United States.

The retail sales report captures in-store sales as well as catalog and other out-of-store sales. The report also breaks down sales figures into groups such as food and beverage, clothing and automobiles.

Each month, questionnaires are mailed to a probability sample of approximately 5,500 employer firms selected from the larger Monthly Retail Trade Survey (MRTS).

Advance sales estimates are computed using a link relative estimator. For each detailed industry, the Census Bureau computes a ratio of current-to-previous month weighted sales using data from units for which we have obtained usable responses for both the current and previous month.

For each detailed industry, the advance total sales estimates for the current month is computed by multiplying this ratio by the preliminary sales estimate for the previous month (derived from the larger MRTS) at the appropriate industry level. Total estimates for broader industries are computed as the sum of the detailed industry estimates.

For a limited number of nonresponding companies that have influential effects on the estimates, sales may be estimated based on historical performance of that company. The monthly estimates are benchmarked to the annual survey estimates from the Annual Retail Trade Survey once available. The estimates are adjusted for seasonal variation and holiday and trading day differences.

Core Retail Sales

Core retail sales refers to aggregate retail sales in the U.S. excluding automobile and gasoline sales, which are excluded due to their volatility.

Automobile sales account for about 20% of Retail Sales, but they tend to be very volatile and distort the underlying trend. The Core data is therefore thought to be a better gauge of spending trends.

Core retail sales data is used extensively by various government bureaus to calculate GDP, develop consumer price indexes and analyze current economic activity, while the Federal Reserve uses the numbers to assess recent trends in consumer purchases.

Core retail sales is also a strong indicator of economic health and whether it is contracting or expanding. Retail sales make up nearly one-half of personal consumption, which in turn accounts for nearly 70 percent of GDP. Retail sales, in terms of direct economic activity, accounts for almost one-third of GDP.

Retail Sales Data vs. Core Retail Sales Data

The difference between the U.S. retail sales numbers and U.S. core retail sales data is that core retail sales excludes autos and gasoline. Auto and gasoline components are excluded because they are often very volatile in price fluctuations. The Census Bureau releases retail sales data, for month over month (MoM) and year over year (YoY) percentage changes. MoM data is the more important of the two as this data series is more likely to show a surprise or unexpected reading; markets are also more likely to react to deviations from expectations in these numbers.

However, core retail sales data is released as month to month changes only. Data is also collected for a Retail Sales Control Group MoM change; this group excludes autos, gasoline and construction materials. All retail sales data is released monthly, approximately two weeks after the target month.

Why Markets Care About Retail Sales Report

Retail sales reports are a key economic indicator and reflect statistics culled from thousands of retail outlets and food service entities. Consumer spending accounts for two-thirds of GDP; therefore, retail sales are considered a major driver of the health of the U.S. economy.

Because retail sales are a measure of consumer demand for finished goods, they are an indicator of the pulse of an economy and its projected path toward expansion or contraction.

The percentage increases or decreases also give a good indication of how fast the economy is contracting or expanding. Very strong or weak retail sales can also put upward or downward pressure on prices

As a leading macroeconomic indicator, healthy retail sales figures typically elicit positive movements in equity markets.

Retail sales figures are vital to stock investors and particularly those who directly invest in retail companies. The figures are also a big component of the total gross domestic product (GDP) in the United States, so any extended drop-offs in retail spending can trigger a recession by lowering tax receipts and forcing companies to reduce their workforce.

As a broad economic indicator, the retail sales report is one of the timeliest and provides data that is only a few weeks old. Individual retail companies often provide their own sales figures at the same time per month, and their stocks can be volatile at this time as investors process the data.

Retail sales is the primary gauge of consumer spending, which accounts for the majority of overall economic activity.

Other Economy News – Markets

The focus on Friday is key economic data such as retail sales, import and export prices, industrial production and consumer sentiment. The impact of hurricane Florence is closely watched by the investors.

Asian shares finished higher, while European shares are trading higher.

The initial signs from the U.S. Futures suggest that Wall Street might open positive.

As of 7.45 am ET, the Dow futures were adding 47.00 points, the S&P 500 futures were up 5.00 points and the Nasdaq 100 futures are progressing 28.00 points.

U.S. stocks closed higher on Thursday. The Dow climbed 147.07 points or 0.6 percent to 26,145.99, the Nasdaq advanced 59.48 points or 0.8 percent to 8,013.71 and the S&P 500 rose 15.26 points or 0.5 percent to 2,904.18.

On the economic front, the Commerce Department’s Retail Sales report for August will be published at 8.30 am ET. The consensus is for 0.4 percent, down from 0.5 percent last month.

The Labor Department’s Import and Export Prices for August will be issued at 8.30 am ET.

Chicago Federal Reserve Bank President Charles Evans will speak about current economic conditions and monetary policy at the Northeast Indiana Regional Economic Forum in Fort Wayne, Indiana, with audience and media Q&A at 9.00 am ET.

The Commerce Department’s Business Inventories report for July will be published at 10.00 am ET. The consensus is for increase of 0.5 percent versus 0.1 percent a month ago.

The Institute for Social Research of the University of Michigan’s Consumer Sentiments report for September will be released at 10.00 am ET. The consensus is for 97.0, slightly up from 96.2 last month.

Baker Hughes Rig Count for the week will be issued at 1.00 pm ET. In the prior week the North American Rig Count was 1252, and U.S. Rig count was 1048.

Asian stocks ended broadly higher on Friday. Chinese stocks fluctuated before closing lower. The benchmark Shanghai Composite index dropped 4.94 points or 0.18 percent to 2,681.64 while Hong Kong’s Hang Seng index ended up over 1 percent at 27,286.41.

Chinese industrial output and retail sales figures for August topped forecasts.

Japanese shares rallied to hit their highest level in more than seven months. The Nikkei average climbed 273.35 points or 1.20 percent to 23,094.67 while the broader Topix index closed 1.09 percent higher at 1,728.61.

Australian shares finished notably higher. The benchmark S&P/ASX 200 index climbed 36.60 points or 0.60 percent to 6,165.30 while the broader All Ordinaries index ended up 36.40 points or 0.58 percent at 6,276.30.

European shares are trading higher. Among the major indices, CAC 40 of France is climbing 13.25 points or 0.25 points. DAX of Germany is gaining 25.80 points or 0.23 percent. FTSE 100 of England is progressing 15.47 points or 0.21 percent. Swiss Market Index is gaining 1.47 points or 0.02 percent.

Euro Stoxx 50, Europe’s leading Blue-chip index for the Eurozone, is currently up 0.17 percent.

Author

Ike Obudulu

Ike Obudulu

Versatile Certified Fraud Examiner, Chartered Accountant, Certified Internal Auditor with an MBA in Finance And Investments who has both worked for and consulted with some of the world's largest companies on main street and wall street in over 20 countries, Ike brings his extensive reporting and investigations experience to bear on his role as Chief Editor.
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