MNI DATA PREVIEW:Retail Sales Driven by Autos, Gasoline Stores

By Sara Haire and Holly Stokes

HIGHLIGHTS:

- Analysts are forecasting a 1.9% gain for retail sales and a 0.9% gain for

retail sales ex-auto for September. 

- Hurricanes Harvey and Irma are the main driver behind the expected gains for

both retail sales and ex-auto.

- Gasoline store receipts and auto sales are expected to spearhead the rise

expected for retail sales. 

- Brick and mortar sales could see a hit due to closures caused by the

hurricanes.

     Analysts are expecting the hurricanes to have caused disruption to retail

sales, but not enough to offset the expected 1.9% gain for retail sales and the

0.9% gain for retail sales ex-auto for September. The main reason analysts are

expecting an uptick in retail sales is due to high gas station, auto, and food

sales typically seen after hurricanes.

     Analysts are expecting a mixed impact on September retail sales, explaining

that the hurricanes caused business activity to slow down in some industries,

but pick up in others. Amherst Pierpont explains that it is possible that a

disproportionate drop in one geographic region and industry could cause a

sizable drag on retail sales. The respondents from the ISM non-manufacturing

index report indicated that Harvey has disrupted business activity in the oil

and gas industry, with refineries and petrochemical plants being forced to shut

down. Despite still forecasting a relatively strong gain of 1.9%, Goldman Sachs

claims retail sales are still posting a lackluster rebound following a hurricane

related decline in August. Despite this potential disruption, most analysts are

still forecasting a strong gain of 1.9%, with a range from 1.4% to 2.7%,

following a decline in August. 

     After Hurricane Katrina devastated the gulf coast region in 2005, headline

retail sales, retail sales and food services, and retail sales ex auto all saw

increases. However, there were increases in all except sales for clothing stores

and motor vehicle and parts dealers. Motor vehicle and parts dealers actually

saw a 4.4% decline in sales. Despite this decline in autos, analysts claim that

autos will still see a rise. The reasoning being that after hurricane Katrina,

only 200,000 cars were estimated to be destroyed, meanwhile Houston alone saw

300,000 to 500,000 cars destroyed after Hurricane Harvey according to Cox

Automotives. While Hurricane Irma didn't see as much damage, Cox reports an

estimated 200,000 and 400,000 vehicles were destroyed by the storm. More people

lost cars in Harvey and Irma than they did in Katrina by more than a 2:1 ratio,

indicating a higher need for autos. 

     According to manufacturing unit sales data, domestic auto sales were seen

at 14.2 million, up from the 12.3 million seen in August. Capital Economics

predicts that this will  translate to a 7% month over month rebound in nominal

vehicle sales. Analysts like JP Morgan are looking for the headline figure to

see a boost in sales at motor vehicle and parts dealers. Analysts from BMO are

forecasting headline retail sales to see a 2.6% gain, the fastest growth in more

than 11.5 years, driven mainly by auto sales and gas station receipts. 

     Headline and ex-auto retail sales are expected to post gains in large part

due to gas station sales. Unfortunately for consumers, Texas being hit so

heavily by Hurricane Harvey caused many petroleum plants to shut down, causing a

rise in gas prices. That being said, even without auto sales included in retail

sales, analysts are expecting a 0.9% increase, with gas stations sales being the

main driver. Morgan Stanley predicts gas station sales as seeing more than a 9%

rise. After national gas prices saw an increase of more than 12% last month due

to refinery closures causing a smaller supply, but a growing demand, analysts

like Capital Economics and Barclays anticipate the value of gas station sales

saw a considerable increase in value. 

     Slightly offsetting the expected rise in gas and auto, brick and mortar

sales are expected to take a hit from hurricane driven closures. Analysts are

also discounting chances of a large upswing from Iphone8 sales - with BMO noting

that the phone's sales are significantly lower than its predecessors, likely due

to anticipation of Iphone x. However, there should still be some boost to retail

sales from this release. Also helping recoup brick and mortar's drag, Morgan

Stanley expects internet sales to rebound after an "Amazon prime day payback" in

August.

     Sales at food and beverage stores could prove to have an interesting impact

on retail sales. Analysts at BMO expect grocery store receipts to register a

depressed value due to discounted prices in order to counter Amazon's announced

price cutting at Whole Foods after the recent acquisition.  However, due to

Harvey and Irma, consumers likely cleaned out grocery stores in anticipation of

being unable to access grocery stores easily, making grocers receipts

potentially grow in value. The discounted prices at grocery stores should not

depress the sales grocery stores considering grocers had started the process in

August where a 0.3% gain was still seen. After Hurricane Katrina, there was a

0.8% rise in grocery store sales compared to September of 2006 which actually

posted a decline.   

     Restaurants and beverage services could see depressed sales as a number of

tourist driven cities in Florida and Texas took a substantial hit during Irma,

translating to fewer customers at restaurants in these places. However, a hit to

one geographic region does not offset gains in other regions. Even if one or two

industries register declines in retail sales, analysts forecast that large gains

in other industries will push retail sales to post a large gain.

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

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