MNI DATA ANALYSIS: US July Retail Sales Rise 0.5%, Ex-MV +0.6%>

--July Retail Sales Ex. Auto, Gas, Bldg Mat, Food Service Up 0.5%

--Nonfarm Productivity +2.9% vs +2.4% Expected, ULC -0.9% vs -0.4% Expect

By Kevin Kastner

     WASHINGTON (MNI) - The value of retail sales rose by 0.5% in July 

overall and 0.6% excluding motor vehicle sales, well above expectations 

for 0.1% and 0.4% gains, respectively, but following downward revisions 

to sales in June, data released by the Commerce Department Wednesday 

showed. 

     Analysts have recently had a strong tendency to overestimate sales, 

so today's data sharply deviate that trend. However, markets had 

expected a 0.5% increase for overall retail sales, suggesting that they 

questioned analysts' expectations for soft vehicle and gasoline sales.

--MOTOR VEHICLES, GAS BOTH UP

     The key factor in the upside surprise for the headline figure were 

gains in both motor vehicles and gasoline, which came on top of expected 

solid gains in other categories. Motor vehicle sales posted a 0.2% 

increase after a 0.1% gain in the previous month. 

     Gasoline station sales rose by 0.8% in July after a 0.3% June 

gain, in contrast to a decline in the AAA data.

     Food services and drinking places' sales remained strong in July, 

registering a 1.3% increase after rising by 1.6% in June. Building 

materials sales, however, were flat in the month after a 0.1% June gain.

     Retail sales excluding autos, gasoline, and building materials  

rose by 0.6% in July. Further, excluding food services as well as the 

other three measures, retail sales were still up 0.5% after a 0.1% June 

decline.

     Other sales categories were generally higher, with solid gains seen 

for clothing stores, department stores, and food and beverage stores. 

There were declines in sales of furniture, health care, and sporting 

goods, as well the "miscellaneous" category.

--3Q CONSUMPTION STARTS STRONG

     Incorporating a small upward revision to May sales, the larger 

downward revision to June sales, and today's data for July, third 

quarter retail sales are up 4.3% at an annual rate from the second 

quarter average, much better than would be expected after a solid second 

quarter. 

     Sales excluding motor vehicles were up 4.9% at an annual rate from 

the previous quarter, while sales excluding autos, building materials, 

and gas were up 4.6%. Even when food services were also excluded, third 

quarter sales were up 2.6% at an annual rate from the second quarter, 

pointing to underlying strength outside the volatile categories. 

--NONFARM PRODUCTIVITY UP, ULC DOWN

     Also released at the same time on Wednesday, nonfarm productivity 

rose 2.9% at an annual rate in the second quarter after a 0.3% first 

quarter rise. Analysts had expected a 2.4% gain. Not surprisingly, the 

headline number was lifted by a boost in the output component, which 

rose by 4.8% after a 2.6% gain in the previous quarter. Hours worked 

growth slowed to 1.9% from 2.3% in the previous quarter. 

     Unit labor costs fell 0.9% in the second quarter, down from a 3.4% 

gain in the first quarter and below the 0.4% decline expected. This was 

the worst quarterly showing for unit labor costs since 1.5% decline in 

the third quarter of 2014. The sharp in productivity growth was, of 

course, the key factor. Adding to that, compensation growth slowed to 

2.0% from 3.7% in the first quarter, and real hourly compensation was 

meager at 0.3%. 

     On a year/year basis, second quarter productivity was up 1.3% 

after a 1.0% rise the previous quarter, while unit labor costs were 

slowed modestly to 1.9% year/year from a 2.0% year/year rise in the 

first quarter. 

     ** MNI Washington Bureau: 202-371-2121 ** 

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