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; +1 (973) 494-2611; email: harrison.clarke@marketnews.com

--MNI Washington Bureau; +1 202-372-2121; email: shikha.dave@marketnews.com

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