MNI 5 THINGS: Gas Prices Expected To Lead US Retail

By Holly Stokes

     WASHINGTON (MNI) - The Advance Monthly Sales For Retail And Food Services

will be released Tuesday and the outlook is for a 0.3% rise for overall retail

sales and a 0.5% rise ex-auto, based on an MNI survey of analysts.

     Ahead of the release, we outline five themes for particular attention.

--ANALYST HISTORY SUGGESTS DOWNSIDE RISK

     The history of analysts' misses in April suggests that both the headline

and ex-auto estimates face a small downside risk. In the past 20 years, analysts

have overestimated April retail sales 11 times, and underestimated only six

times. This trend continues in more recent history, with overestimates in three

of the last four years. Analysts have also demonstrated a tendency to

overestimate April ex-auto, however the pattern is less strong in the last 20

years - with nine overestimates to seven underestimates. This pattern appears to

have intensified in more recent history, again showing three overestimates in

the past four years.

--DOWNSIDE RISK TO MARKET EXPECTATIONS

     Last month, both markets and analysts faced an upside surprise as retail

sales jumped 0.6%, above both the 0.2% projected by markets and the 0.3% by

analysts. Now analysts and markets both expect another gain, but analysts expect

a more muted 0.3% rise where markets see a stronger 0.5% print. However, both

markets and analysts have shown a tendency to overestimate in the past year,

with high misses in seven of the last twelve months. The downside risk to the

whisper number is made clearer, with three overestimates in the past four

months. Further, markets are typically less accurate than analysts - with

markets having an absolute average miss of 0.6pp compared to analysts' 0.3pp.

--GAS PRICES TO LEAD RETAIL RISE

     Gasoline station sales dragged an otherwise robust March report, as the

category fell 0.3%. Now, gasoline station sales looks set to lead the rise in

April - as the already released CPI report shows gas station sales jumped in the

month. There is a strong correlation between the gas prices consumers pay,

measured as CPI gasoline, and the gasoline station sales reported in retail

sales. Consequently, a 3.0% jump in CPI gasoline month/month should translate

into a healthy rise in gas sales and the overall retail sales measure.

--AUTOS TO DRAG RETAIL

     Analysts expect autos to drag an otherwise strong report, as suggested by

the stronger 0.5% estimate for retail sales ex-auto. Already released data on

vehicle sales suggest auto retail sales will be soft in April. Auto sales led

March's 0.6% rise, as the category surged 2.0% - so April's soft reading should

be a dramatic pullback. All the same, analysts expect another healthy retail

report, estimating ex-autos to come in the strongest since November. 

--COLDER APRIL CREATES UNCERTAINTY

     Second quarter retail sales are typically stronger than the first, and

April's retail sales should be a first indicator of Q2 personal consumption

strength. However, atypical April weather gives a small downside risk. This

April was the coldest in 21 years, and the unusually chilly weather could throw

off seasonal adjustments. The CPI report shows apparel prices increasing 0.3%,

which should be a positive for retail clothing. But with delayed spring

temperatures, seasonal clothes shopping could have taken a hit and be softer

than seasonal adjustments expect. Building materials and garden equipment also

could face a downside risk as planting and other yard work was delayed.

--MNI Washington Bureau; +1 202-371-2121; email: holly.stokes@marketnews.com

[TOPICS: MAUDS$,M$U$$$]