MNI DATA PREVIEW: Sharp Bounce Seen In October US Retail Sales

By Alexandra Kelley

     WASHINGTON (MNI) - U.S. retail sales are expected to bounce in October,

with analysts looking for a gain of 0.4% m/m, recovering from September's

unusually low -0.3%. 

     The core measure of retail sales excluding motor vehicles mirrors the

outlook, forecasting a 0.2% acceleration from a much slower -0.1% rate in

September. 

     The weak data last month suggested a softness in consumer confidence, but

October's forecasted reading should assuage worries of a crack in consumer

spending base.

     Retail sales are closely linked with the price of gasoline, which posted

major gains in the October CPI report, jumping to 2.7% after steady recent

declines. September saw a 0.7% dip in gasoline sales driven by low prices, which

looks to be rebounding this October. Auto sales saw dips as well, which isn't

likely to improve on Friday.

     The same report showed that apparel prices dropped to -1.8% from -0.4%,

implying lower nominal retail sales for clothing. Dismal vehicle sales are also

expected to dampen the headline number. 

     As motor vehicles and gas are volatile sectors, analysts will look to core

readings as a more robust marker. Andrew Grantham, chief economist at CIBC

Economics, eyes the retail sales 'control group' figure that excludes gas, auto,

food services and building materials, which he says, have had a "good run for a

few months" and are expected to maintain steady readings in the future. 

     The control group feeds into GDP calculations. With the third quarter GDP

readings coming in at a comparatively strong 1.9%, robust retail sales control

group readings are especially likely. 

     Grantham also believes a healthy savings rate among consumers and a steady

employment rate will contribute to the retail sales number. These factors,

coupled with consistently positive consumer sentiment and confidence indexes,

make Grantham confident that the consumer will still be "one of the main drivers

of growth in the future quarters." 

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

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