Econoday Report: Retail Sales 14, 2005

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2005 U.S. Economic Events & Analysis

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Retail Sales

Definition
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 10/14/05 For Sep 2005

Retail Sales, M/M change
Actual	0.2%
Consensus	0.3%
Consensus Range	-1.3% to 0.9%

Retail Sales less autos, M/M change
Actual	1.1%
Consensus	0.5%
Consensus Range	-0.8% to 1.3%

Highlights
Sales at retailers & food service providers edged only 0.2% higher in September, held down by a 2.8% give back in auto sales. Excluding auto sales, retail sales showed solid strength with a rise of 1.1% -- more than double expectations.

The Commerce Department said regions affected by Katrina and Rita represent a "minimal" percent of total retail sales. It could not isolate the effects but said there were both positive and negative effects.

Sales at gasoline stations jumped 4.0% in the month reflecting higher prices (but note that price gains at the wholesale level, data to be released next week, are likely to show a bigger increase, confirming reports from the industry that margins at gas retailers were hurt, not helped, by the month's big price run up).

Auto sales continued to slide following the big incentive rush in June and July. Note that sales in August fell back 11.2%.

Excluding autos and gas, retail sales rose a healthy 0.6% for a second month. This reading belies the current downturn in consumer confidence measures, pointing to solid consumer-driven economic growth.

Categories showing gains included furniture up 1.2%, health care stores up 1.1%, building materials & garden stores up 1.0%, electronics & appliances up 0.8%, and food & beverage stores up 0.6%.

Today's report should be a plus for the dollar and a minus for bonds. The Fed is likely to consider the report as further evidence of economic strength and further justification for higher interest rates.

Market Consensus Before Announcement
Retail sales dropped 2.1 percent in August, due to a 12 percent plunge in auto sales. Excluding autos, sales jumped 1 percent, twice as strong as the July gain - but due largely to higher gasoline prices. Hurricanes Katrina and Rita will certainly impact September retail sales in a number of ways - positive and negative!

Retail sales Consensus Forecast for Sept 05: 0.3 percent
Range: -1.3 to 0.9 percent

Retail sales ex autos Consensus Forecast for Sept 05: 0.5 percent
Range: -0.8 to 1.3 percent

Trends

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.

Data Source: Haver Analytics

2005 Release Schedule

Released On: 1/13 2/15 3/15 4/13 5/12 6/14 7/14 8/11 9/14 10/14 11/15 12/13

Released For: Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov

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