September Retail Sales: Even Worse Than Economists's Low Forecasts

October 15, 2014

by Doug Short

The Advance Retail Sales Report released this morning shows that sales in September came in at -0.3% (-0.32% at two decimals) month-over-month, down from 0.6% in August. Core Retail Sales (ex Autos) were -0.2%, down from 0.3% in August.

Today's numbers came in well below the Investing.com forecast of -0.1% for Headline Sales and 0.3% for Core Sales.

The two charts below are log-scale snapshots of retail sales since the early 1990s. Both include an inset to show the trend over the past 12 months. The one on the left illustrates the "Headline" number. On the right is the "Core" version, which excludes motor vehicles and parts (commonly referred to as "ex autos"). Click on either thumbnail for a larger version.

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The year-over-year percent change provides a better idea of trends. Here is the headline series.

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Here is the year-over-year version of Core Retail Sales.

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Retail Sales: "Control" Purchases

The next chart illustrates retail sales "Control" purchases, which is an even more "Core" view of retail sales. This series excludes Motor Vehicles & Parts, Gasoline, Building Materials as well as Food Services & Drinking Places. I've highlighted the values at the start of the two recessions since the inception of this series in the early 1990s.

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For a better sense of the reduced volatility of the "Control" series, here is a YoY overlay with the headline retail sales.

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Real Retail Sales: A Preliminary Estimate

After the Consumer Price Index for September is released next week, we'll have a more detailed look at retail sales adjusted both for inflation and population growth. A preliminary estimate of real sales, based on an extrapolation for the seasonally adjusted CPI, is a month-over-month decline of 0.1%, which would put the YoY growth in the vicinity of 2.9%.

Bottom Line: The Advance Retail Sales for September, both headline and core, were below expectations and quite disappointing. However, the Advance numbers are subject to substantial revisions, as I've illustrated here.

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