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 1/12/07 For Dec 2006 | |||||||||||||||||||||||||
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Highlights
The consumer continued to pump up the economy in December as retail sales surged for the second straight month. Retail sales jumped 0.9 percent in December, following a 0.6 percent boost in November. December's overall number was well above the consensus forecast for a 0.6 percent boost in overall retail sales. Excluding motor vehicles, retail sales spiked 1.0 percent in December, following a 0.7 percent jump in November. The consensus had projected a 0.5 percent increase in retail sales excluding motor vehicles. In contrast to November, service station sales got a boost from higher gas prices in December. Service station sales rose 3.8 percent in December, after a 2.9 percent increase in November. Excluding gas station sales, retail sales for December increased 0.6 percent, following a 0.4 percent gain in November. Excluding both gas station and motor vehicles components, retail sales posted a gain of 0.7 percent in December, following a 0.5 percent boost in November.
Strength in retail sales in December was widespread. Gains were led by: auto dealers, up 0.3 percent; furniture, up 0.7 percent; electronics, up 3.0 percent; food & beverage stores, up 0.7 percent; health & personal care, up 1.2 percent; gasoline stations, up 3.8 percent; clothing, up 0.6 percent; general merchandise, up 0.9 percent; non-store retailers, up 0.3 percent; and food services, up 2.3 percent.
Only a few major components declined: building materials, down 1.1 percent; sporting goods, down 0.1 percent; and miscellaneous stores, down 2.6 percent.
Year-on-year, overall retail sales in December were up 5.4 percent, compared to 4.9 percent in November. Excluding motor vehicles, December's year-on-year sales were up 5.8 percent versus 4.8 percent the prior month. Excluding motor vehicles and gas station sales, year-on-year sales in December stood at 6.1 percent - up from 5.6 percent the prior month.
Today's report shows a very robust consumer sector. Surprisingly, the biggest risk to the soft landing is now turning out to be the consumer - the economy may be too strong. The retail sales numbers are going to boost fourth quarter GDP and will cause the Fed to put off any interest rate cuts. Also, you will hear a vocal minority suggest that the Fed may even have to raise rates. Today report is a big negative for the bond markets. Equities could take it either way - it's good that the consumer is spending or it's bad that the Fed is not easing anytime soon. The dollar will like it.
Retail Sales jumped 1.0 percent in November, following a 0.1 percent dip in October. Excluding motor vehicles, retail sales rebounded 1.1 percent in November, following a 0.3 percent drop in October. Government retail sales numbers have been running higher than private surveys and markets will be watching to see if this is the case for December. Even so, chain store sales have been improving slightly and portend moderately healthy sales. However, warm weather has dampened seasonal sales somewhat and that effect may show up in the clothing portion of retail sales.
Retail sales Consensus Forecast for December 06: +0.6 percent
Range: +0.3 to +1.1 percent
Retail sales excluding motor vehicles Consensus Forecast for December: +0.5 percent
Range: +0.2 to +0.7 percent
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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. |
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