This morning's strong Retail Sales report will likely offset
the soft factory sector data out of the Euro-zone in today's
trading session, helping stocks maintain the overall positive
tone of recent days. Hard to tell if this will be enough to push
the S&P 500 closer to the new all-time highs that other
indices have reached already, but it will likely be good enough
to offset the pre-open softness.
The Retail Sales numbers came in better than expected, both on
the 'headline' as well as the part that excludes gasoline and
autos. The 'headline' strength of +1.1% relative to expectations
of +0.5% gain was mostly due to high-priced gasoline sales, but
the report shows plenty of strength even otherwise.
Excluding autos and gasoline, Retail Sales were up +0.4%,
better than the expected +0.2%. Even the so-called 'control'
component which excludes autos, gasoline and building materials
and feeds into GDP calculation, came in better than expected at
up +0.4% vs. the +0.2% expected. Revisions were mixed, with
January revised higher and December revised lower.
The concern has been that the strong consumer spending
momentum in the fourth quarter would not carry into the current
period, due to the payroll tax hike, higher gasoline prices, and
delayed tax refunds from the IRS. We didn't see evidence of that
in last month's Retails Sales data or in today's numbers, but a
number of retailers including
) and others cited those factors in 'explaining' the softer start
to the year. The only plausible explanation for this seeming
disconnect is that improvement is wages is helping offset the
hits to household buying power from the tax and gasoline
If that is a correct reading of the ground realities -- by no
means a certainty at this stage -- then consumer spending likely
accelerated in the current period from fourth quarter's 2.1%
pace. This would mean that we could potentially see a better GDP
print outside of government spending in the current quarter.
are scheduled for release today at 10:00 AM EST and are expected
to increase by 0.5% after increasing by 0.1% in
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