MNI DATA PREVIEW: Healthy Retail Sales Dragged By Soft Autos

By Sara Haire and Holly Stokes

HIGHLIGHTS: 

-Retail sales expected to increase 0.3%, held back by softer auto sales after a

hurricane-driven surge.

-Ex-auto retail sales to rise 0.7% due to higher gas prices, iPhone sales, and

holiday shopping.

-Control group to show continued strength in consumption feeding into Q4 GDP. 

     WASHINGTON (MNI) - November retail sales are expected to post a 0.3% gain,

held back from a larger gain by a stumble in auto sales. Excluding motor

vehicles, analysts expect sales to post a healthier 0.7% rise.

     --UPSIDE SURPRISE POSSIBLE

     Over the past 20 years, November headline retail sales have been

underestimated eleven times and ex-auto retail has been underestimated 12 times.

This suggests the possibility of stronger-than-expected gains for both figures. 

     If analysts are right and there is a 0.3% gain in November retail sales,

barring no revisions to the October data, the year-over-year would be at 2.1% vs

the year-over-year last November of 3.7%, indicating analysts only expect mild

growth from last year compared to the year prior. 

--SOURCES OF STRENGTH

     Analysts expect gains to be led by gas station sales, with Morgan Stanley

estimating that gas stations sales rose by 4.2%. Societe Generale agrees that

gas station receipts should have received a healthy boost, based on the roughly

6.6% spike in seasonally adjusted November gas prices.

     Analysts also point to iPhone sales as a possible source of strength.

Capital Economics notes that the model's November release should provide a

seasonally unaccounted for boost, given that  new iPhone models are typically

released in September. 

     With Thanksgiving coming early this year, analysts expect holiday shopping

to show a boost in retail sales. CIBC believes that holiday shopping was boosted

by a rise in income, given the November payroll report. BMO also expects holiday

gains, pointing to the Redbook report of same store sales being up 4.8% y/y in

the final week of November, matching the 3rd best end of November result since

at least 1996. 

     However, these expectations of boosted holiday shopping contradict the

Challenger job report, which stated hirings in the retail sector were expected

to cool off in November.. 

--DRAG FROM AUTOS

     Offsetting some of this strength, auto sales continued to dampen in

November, after September's 15% hurricane-driven surge in real vehicle sales.

Analysts expect anywhere between a 2.7% to a 1% drop in auto sales to hinder an

otherwise strong month of retail sales. Excluding auto sales, analysts forecast

gains between 0.3% and 0.9%, with the median landing on a healthy 0.7% gain.

--IMPACT ON GDP

     Disregarding the noisier auto, gas, and building material sectors, analysts

expect the "control" group" to post a 0.3% to 0.4% gain. This measure, which

feeds directly into consumption in GDP calculation, suggests to Credit Suisse

that real consumer spending has remained solid. CIBC echoes that a continued

rise in the control group means "consumption will again be an important

contributor to the roughly 3% GDP advance in the fourth quarter." 

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

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

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