REPEAT:MNI 5 THINGS:Analysts Look For Strength In US Sales

Repeats Story Initially Transmitted at 14:24 GMT Jun 13/10:24 EST Jun 13

By Holly Stokes

     WASHINGTON (MNI) - The Advance Monthly Sales For Retail And Food Services

will be released Thursday and the outlook is for a 0.4% rise for overall retail

sales and a 0.5% rise ex-auto, based on an MNI survey of analysts.

     Ahead of the release, we outline five themes for particular attention.

--ANALYSTS' MISSES MIXED, BUT DOWNSIDE MISSES LARGER

     In the past 20 years, analysts have overestimated May retail sales nine

times and underestimated 10 times, showing no clear directional risk. However,

while there is no clear tendency to overestimate or underestimate - analysts'

have a history of overestimating by a greater degree. In the last 20 Mays,

analysts' average overestimate has been by 0.44pp while the average

underestimate has been by 0.25pp - suggesting that if analysts do overestimate

there could be a greater downside surprise. These historical trends hold true

for forecasts of retail ex-auto, as misses are split between nine overestimates

and seven underestimates in the last 20 years. Again, overestimates tend to be

by a greater degree, with an average overestimate of 0.47pp compared to an

average underestimate of 0.27pp. Further, this tendency of large downside

surprises in retail sales ex-autos is more pronounced in recent years, with the

average overestimate in the last 10 Mays 0.60pp compared to the average

underestimate of 0.25pp. 

--MARKETS EXPECT SOFTER GAIN

     Markets expect retail sales to post a slightly softer gain than analysts,

with the whisper number tracking at a 0.3% rise. Both markets and analysts have

shown a tendency to overestimate in the last year. Since May of 2017, analysts

have overestimated the measure six times and underestimated four times, while

markets have overestimated eight times and underestimated four times. This

tendency to overestimate suggests a downside risk to both the analyst and

whisper forecasts. However, market forecasts are typically less accurate and

miss by a larger degree than analysts, and a downside surprise closer to the

whisper's more muted forecast would break with this trend.

--GAS PRICES TO GIVE BOOST

     Last month retail sales received a boost from gasoline station sales, as

the category rose 0.3% month/month. Again, analysts look for gas sales to help

lift retail sales. Historically, gas station sales have moved in line with gas

prices, and the already released CPI report shows gas prices rose 1.7% in May

adding onto April's 3.0% jump. Accordingly, another gain from gas station sales

can be expected.

--CONFLICTING DATA FOR AUTO FORECASTS

     As evidenced by a stronger forecast for retail ex-auto than overall retail,

most analysts expect autos to be a drag on sales. In April, motor vehicle and

parts were flat after jumping 2.0% in March. Now, many analysts call for a

further slowdown, looking at industry data that shows a softening in auto

manufacturing unit sales. However, the 0.3% rise in CPI new vehicles in May

suggests some potential strength. Barring noise seen from the string of

hurricanes in mid-2017, CPI new vehicles and retail sales motor vehicles tend to

move in tandem. The shift towards rising prices in new cars could help to

partially offset weakness in auto sales. 

--CONTROL GROUP TO SHOW CONTINUED HEALTH

     The less volatile control group, which excludes autos, gas, and building

materials, may paint a picture of continuing underlying strength. After annual

revisions, the control group has posted healthy gains for the last three months,

averaging a 0.4% rise. Many analysts expect this trend to continue, forecasting

a 0.4% rise in May. This would put May control sales 0.1pp higher than the

12-month trailing average, and would be a positive for second quarter GDP, as

the retail sales control group is a direct input in the calculation of

consumption. 

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