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 3/13/08 For Feb 2008 | |||||||||||||||||||||||||
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Highlights
Retail sales unexpectedly dropped in February and indicate that the consumer sector is under a lot more stress than previously believed and no longer can keep the economy out of a downturn. Retail sales fell 0.6 percent in February, following a 0.4 percent gain the month before. The headline sales number was sharply below the consensus forecast for a 0.2 percent boost in sales in February. Excluding motor vehicles, retail sales declined 0.2 percent after rebounding 0.5 percent in January. The market had projected a 0.2 percent increase for sales excluding motor vehicles in February. Excluding gasoline, sales fell 0.5 percent, following a 0.2 percent rise the month before. Sales were not as weak when excluding both motor vehicles and gasoline but still slipped 0.1 percent in the latest month after rising 0.2 percent in January. While a few components posted moderate gains, the overall tenor of the report is clear that the consumer sector is no longer pulling its weight to keep the economy out of a downturn.
By components, February's decline was led by motor vehicle sales and gasoline which fell 1.9 percent and 1.0 percent, respectively. Retail weakness has spread to some unexpected areas as even electronics has lost its luster with a fall in February and notably spending was weak in staple goods with food & beverage store sales dropping in the latest month. Decreases were also seen in furniture, building materials & garden equipment, miscellaneous store retailers, and food services & drinking places. Gains were seen in sporting goods, general merchandise, and apparel.
Overall retail sales on a year-on-year basis in February fell to up 2.6 percent from up 4.0 percent in January. Excluding motor vehicles, the year-on-year gain declined to up 4.4 percent from up 5.3 percent in January. Excluding both motor vehicle and gasoline sales, the year-on-year rate dropped to up 2.4percent from up 3.0 percent in January. The bottom line is that the consumer sector seems to have weakened significantly and is pulling back on spending - probably more out of caution than to actual weakness in labor markets or income growth. In reaction to this morning's numbers, fed funds futures increased the odds of a 75 basis point cut in the fed funds target rate on March 18.
Retail sales are showing signs of softening and what these numbers do will have a major impact on whether the economy tilts into recession or not as the consumer sector does the heavy lifting in terms of contributing to economic growth. Retail sales rebounded in January but strength was primarily in motor vehicles and gasoline and with the latter boosted by price increases. Retail sales rose 0.3 percent in January, following a 0.4 percent drop in December. Excluding both motor vehicles and gasoline, retail sales were flat in January after declining 0.3 percent in December. More recently, a few retailers have reported positive sales numbers but most have reported disappointing sales, including for motor vehicles.
Retail sales Consensus Forecast for February 08: +0.2 percent
Range: -0.5 to +0.5 percent
Retail sales excluding motor vehicles Consensus Forecast for February 08: +0.2 percent
Range: -0.4 to +0.5 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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