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MNI 5 THINGS: US Retail Sales Seen +0.1%, Some Downside Risk

By Shikha Dave and Harrison Clarke
     WASHINGTON (MNI) - The US retail sales report will be released Wednesday
and the outlook is for a 0.1% rise for overall sales and a 0.4% rise ex-auto,
based on an MNI survey of analysts.
     Ahead of the release, we outline five themes for particular attention.
--ANALYSTS OVERESTIMATE HEADLINE SALES
     Analysts are expecting headline retail to rise by 0.1% in July, but there
is a downside risk to even that soft forecast. In the last 20 years, analysts
have overestimated the headline value 10 times and underestimated it nine times.
When analysts do overestimate, their misses average 0.32pp vs 0.37pp when they
underestimate. 
     Over the last 10 years, analysts have shown even more of a tendency to
overestimate headline retail, having done so seven times. Although analysts have
been overestimating retail more frequently, their average miss in the past 10
years, at 0.29pp, is lower than the 0.32pp average in previous years, indicating
their forecasts have been slightly more accurate.
--SMALLER DOWNSIZE RISK TO EX-AUTO SALES 
     As with headline retail, analysts often overestimate ex-auto sales in the
month of July. In the last 20 years, they have overestimated 10 times and
underestimated eight times. However, their misses in either direction tend to be
equal, with both their overestimates and underestimates averaging 0.25pp 
     Comparatively, in the last 10 years, analysts have overestimated ex-auto
sales five times, with an average miss of 0.34pp, and underestimated it four
times, with an average miss of 0.25pp. Although analysts are expecting a 0.4%
month/month rise, their history suggests a small downside risk for the month of
July.
--MARKET OVERESTIMATE COULD BE LARGER
     Markets and analysts are not in agreement over what to expect for July
retail sales. Markets are expecting a 0.5% rise while analysts are forecasting
only a small gain of 0.1%. Markets have a higher tendency to overestimate,
having overestimated eight times while underestimating only five times in the
last year. Analysts' estimates in the past year were evenly split between five
overestimates and five underestimates. Markets typically miss more often and by
a larger margin than analysts. 
     When they overestimate, markets miss by 0.5pp and analysts miss by 0.38pp,
and when they underestimate, markets miss by 0.68pp and analysts miss by 0.34pp.
This suggests that there is a high chance of retail sales being much softer than
the market expectation of 0.5% and relatively smaller chance of a downside risk
to analysts' 0.1% expected gain.
--GASOLINE STATION SALES TO PULL BACK
     The Consumer Price Index for gasoline, which has a very good correlation
with gas station retail sales, fell 0.6% in July, indicating a downside risk.
Gasoline CPI tends to be more volatile than gas station sales, so the decrease
in July suggests a moderate downside risk for gas station sales. A July decline
in gasoline retail sales would break a string of three straight gains, so some
pullback is to be expected.
--AUTOS SALES TO DECLINE DESPITE HIGHER PRICES
     Although unit auto sales are expected to decline in July, also breaking a
string of gains, higher vehicle prices could pose some upside risk. The Consumer
Price Index for new vehicles, which correlates with retail motor vehicle sales,
was up 0.3% in July, so it is possible that the projected losses in auto sales
may be partially offset by a higher value per unit. 
     Additionally, the CPI for used cars and trucks was also up 1.3% in July.
However, retail motor vehicles sales and new vehicles CPI do not always change
in the same direction as reliably as other retail sales indicators and their
respective CPIs. Since January 2012, motor vehicle sales and new vehicles CPI
have moved in opposite directions 30 times, or 38% of the time.
--MNI Washington Bureau; tel: +1 202-371-2121; email: kevin.kastner@marketnews.com
[TOPICS: MAUDS$,MAUPR$,M$U$$$]

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