MNI: 5 Things To Look For: US Retail Sales Report

Repeats Story Initially Transmitted at 21:00 GMT Feb 13/16:00 EST Feb 13

By Sara Haire and Holly Stokes

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

will be released Wednesday, with the median forecast among analysts in an MNI

survey expecting a 0.2% rise for headline retail sales and a 0.5% gain ex-auto. 

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

--ANALYSTS BELOW HEADLINE MARKET EXPECTATIONS

     The median analyst forecast of 0.2% gain in retail sales is slightly below

market expectations of a 0.3% rise. In the past 11 months, the whisper number

and analyst forecasts have shown no clear tendency to over or underestimate,

despite both frequently missing. However, analysts are typically much closer to

the actual print, with an absolute average miss of 0.27pp compared to the

market's absolute average miss of 0.58pp. But even analysts are divided as to

what retail sales will do, with estimates ranging from a 0.2% decline to a 0.3%

gain. If the headline print comes in at analysts' median forecast, this could

help ease some of the markets' mounting anxieties of inflation and allow

equities to regain some stability. 

--UPSIDE RISK TO EX-AUTOS

     MNI surveys and calculations show a tendency for analysts to underestimate

retail sales ex-auto, with 11 underestimates vs six overestimates in the past 20

years. This trend holds true in more recent history, with six underestimates vs

three overestimates in the past 10 years - and the last two years being

underestimated. This would suggest an upside risk to the survey forecast of

0.5%. Further, of these misses in the past 10 years, the average miss for

underestimates, at 0.33pp, has been slightly larger than the average

overestimate of 0.20pp. 

--AUTOS DOWN BUT STILL STRONG

     Autos may pose a slight drag to retail sales, as domestic motor vehicles

slowed to 12.8 million in January from 13.6 million from December. Despite the

decline following the post hurricane gains, total motor vehicle sales remain

strong - with this January marking the third year in a row that January light

auto sales broke 17 million - setting a new record. Prior to this streak, light

auto sales have not exceeded 17 million during the month of January since 2006,

following Hurricane Katrina. This points to auto sales continuing along the

strong trendline, however it may not be a driver for this month's predicted

gain. 

--GAS PRICES ARE UP BUT TEMPERATURES DECLINED

     Last month, gas station sales posted a disappointing flat reading

month/month, despite being up 9.1% year/year. In the past 10 years, only two

Januarys saw declines and those declines were continuations of trends seen in

prior months. Now, analysts are looking for a rebound due to rising gas prices.

Weekly gas price data show that pump prices rose to $2.67 in January, up from

$2.60 in December. However, January saw particularly cold and icy weather, with

numerous cities across the US seeing record breaking temperatures and winter

storms. This could have pushed many people off of the roads, presenting a slight

downside risk to gas station sales.

--CORRELATING INDICES POINT UP

     Expectations for another healthy post in retail sales are supported by

correlations seen with both the ISM report and the consumer confidence report.

ISM prices paid index has been moving in tandem with the month/month percent

change in seasonally adjusted retail sales. The January ISM prices paid index

reached 72.7%, a level not seen since May 2011. The price increases continue to

be attributed to the rising cost of raw materials. Businesses have struggled

with shifting the cost to the consumer, but if the trend holds, it could be

reflected in retail sales in the coming months, if not in the January data.

Further supporting expectations for a healthy gain, consumer confidence, which

barring hurricane noise has a clear correlation with retail sales, also

increased in January. 

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

--MNI Washington Bureau; +1 212-800-8517; email: sara.haire@marketnews.com