MNI DATA PREVIEW: Retail Sales Seen Flat After Hurricane Spike

By Sara Haire and Holly Stokes

HIGHLIGHTS:

-Headline retail sales expected to post a flat reading, while retail sales

ex-motor vehicles ARE forecasted to see a 0.2% rise. 

-The slowdown in the replacement of damaged cars is likely to be the main driver

behind the flat reading for retail sales.

-Gas stations sales are expected to see a slowdown from sharp gains in August

and September.

-Some analysts disagree on whether the construction post-hurricanes could cause

a rise in building materials or if this has already played out.

     WASHINGTON (MNI) - Following a strong post-hurricane reading in September,

analysts are predicting a flat October retail sales reading due to the

expectation that auto sales and gas station sales retreated in the month. 

     Likewise, retail sales ex-motor vehicles are expected to be up only 0.2%

after a sharp 1.0% jump in September.

     Overall September retail sales posted a 1.6% spike, benefitting from the

replacement of storm-damaged vehicles. Now, October will likely be a month of

retreat, with analysts such as Morgan Stanley estimating that motor vehicles

fell by 0.9%. While analysts universally expect a less impressive retail sales

report, the question becomes by how much sales will slow, with estimates ranging

from a 0.3% decline to a 0.4% gain.

     Excluding motor vehicles, forecasts range from a 0.1% decline to a 0.4%

gain. While ex-motor vehicles should be spared the reversal in auto sales,

analysts still expect a drag from other storm related factors. 

     As refineries came back up post-Harvey, gas prices fell in October, leading

some analysts to expect gas stations sales to retreat by between 1.0% and 2.3%.

Goldman Sachs also expects that there should also be a pullback in grocery store

sales after the Irma related elevated boost in September. 

     Analysts are at odds as to whether or not building materials will also

suffer a reversal, as Morgan Stanley and Capital Economics expect that the sale

of reconstruction material likely slowed in October, but Goldman Sachs argues

that post-hurricane construction likely picked up and led to a boost in the

category. 

     Largely ignoring the storm-related volatility, the retail control group,

which excludes auto, gas stations, food services, and building materials, looks

poised for a modest gain - with analysts expecting a 0.2% to 0.4% gain following

September's 0.4% rise. Another considerable rise in this control group, which is

used to estimate goods spending in GDP, would be consistent with gradual

acceleration in real consumption growth in the fourth quarter, according to

Capital Economics. 

--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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