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Stronger In a Range

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Weaker In A Range

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Ending The Week On A Soft Note

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SP500 PE Ratio vs. CPI Inflation

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
[TOPICS: MAUPR$,M$U$$$]