Analysts weigh in on yesterday’s retail sales figures:
- The absence of the consumer from the recovery story was a major cloud hanging over the outlook. Today’s report should remove some of those clouds. Importantly, gains are not just tied to auto incentives. –Stephen Gallagher, Societe Generale
- I have been looking for households to start buying again the little things that make them happy. If they were doing that, we would know that confidence was improving and spending would pick back up. Well, it looks like that happened in August. Retail sales surged as the “Cash for Clunkers” program did its job. But the surprising data in the report was that people also bought a whole lot of other things as well. They visiting the malls again, spending money at department stores and buying sporting goods, health care products, clothing, appliances and electronics. Only furniture and building supply retailers were left behind. It also looks like food is in again as we gave up our diets to go to restaurants and supermarkets. Feeding one’s face is a nice way to treat yourself well. –Naroff Economic Advisors
- The upward momentum in retail sales in August was not merely a ‘cash-for-clunkers’ or higher gas price phenomenon. Core retail sales (sales excluding autos, gasoline, and building materials) have risen at a 2.7% rate over the last three months versus a 1.7% decline over the last 12 months. –RDQ Economics
- While in light of retailer comments we held a fairly pessimistic expectation for back-to-school sales, the data suggest that spending was actually fairly robust. Traditional soft good categories posted decent performance, including apparel (+2.4%), sporting goods (+2.3%), and so-called general merchandise (1.6%). That fact is giving us greater optimism about the health of the retail sector, which is increasingly likely to have a decent holiday season, especially on a year-over-year comparison. –Guy LeBas, Janney Montgomery Scott
- These are volatile data , and we would not advise making too much of a single month’s move. Also, September will see a sharp drop in automotive sales, and the gasoline component is unlikely to add much if anything to nominal sales in the month either. Therefore, it is highly likely that in retrospect the August results will look like an outlier. –Joshua Shapiro, MFR Inc.
- There are always some quirky seasonals and weather issues that can front load, at this time of year, back-to-school sales. Because incomes continue to be squeezed and jobs are still being lost, one should be cautious about putting too much optimism into one number. Nevertheless, a plus is better than a minus and underscores that, at the very least, the world isn’t still coming to an end. The greater economic challenge, if all this is going to work out in a sustainable manner, is for domestic production to feed domestic demand. To this end, the tire tariff is only the opening shot to protracted negotiations to create more balanced trade. –Steven Blitz, Pangea Market Advisory
- The July/August average for “core” retail sales is still not much stronger than the [second-quarter] average, but after a string of contractions, these data suggest that consumer demand is, at a minimum, stabilizing. Core retail sales may even be starting to firm slightly (up in 2 of the past 3 months), but we will need to see another month or two of positive data to have confidence in that view. –Stephen Stanley, RBS
- The main sources of the upside in August retail control were sectors such as apparel, general merchandise and sports/books/music. The home electronics category also posted its first increase in several months. Finally, restaurant sales held up better than expected. The report casts doubt on the notion that the recent spike in vehicle sales is stealing from demand for other items. It’s important to keep in mind that the vast majority of vehicle purchases are financed or leased. So, the immediate impact on the consumer’s budget constraint when purchasing a new car is not all that large. –David Greenlaw, Morgan Stanley
- The real story in this report is the core numbers. Sales ex-autos were boosted by the rise in gasoline prices and a rebound in food sales, which fell unexpectedly in July. But our measure of core sales, which excludes autos, gas and food, rose by 0.6%, the biggest gain since February… Clearly, welcome news but we need more data to see if this is sustainable or just noise; note that much bigger core gains in Jan/Feb were reversed, and the income and credit constraints on consumers remain intense. –Ian Shepherdson, High Frequency Economics
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.