Retail Sales Weaken in October

As expected, retail sales growth fell substantially at the start of the 3rd quarter in October, rising +.2% MoM (consensus +.1%) versus the 7% MoM revised higher (prior +.6% MoM) increase in September. Excluding autos, retail sales also rose +.2% MoM (consensus +.2%) in October. Ex-auto sales were revised down a tenth to +.3% for the prior month.

It appears that rising fuel prices (gas station sales +.8% MoM) caused demand for furniture (-.9% MoM), department store (-.5% MoM), and sporting goods (-.4% MoM) to decline. Excluding gasoline, retail sales rose +.1% MoM. Food and beverage prices rose +.4% MoM, a slower pace from the +.7% MoM increase the prior month. Surprisingly building materials rose +.6% MoM. Restaurant sales, which are often one of the first discretionary items to be cut, rose +.7% MoM. This makes it less clear what impact the slowing of the economy is having on consumers. The International Council of Shopping Centers last week announced that the 1.6% gain versus the prior year in sales of their members was the worst showing since 1995. Wal-Mart began markdowns of many products earlier than usual this year.

The government uses retail sales excluding autos, gasoline and building materials as an input to GDP. This sector rose +.1% MoM, the lowest pace since last April, except for August when it fell -.3% MoM. Over the past year this sector has grown +5% YoY versus +6.7% YoY for the headline figure. In addition, this group was revised down from an originally reported gain of +.5% MoM in September to +.2% MoM.

Retail sales data from the U.S. Census Bureau is adjusted for seasonal variation and business day differences, but not for price changes. This indicates that when adjusted for inflation, real retail sales declined last month.