REPEAT:MNI 5 THINGS:Downside Risk US Retail Ex-Auto, Gas Drags

Repeats Story Initially Transmitted at 18:51 GMT Apr 13/14:51 EST Apr 13

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

will be released Monday and the outlook is for a 0.3% rise for overall retail

sales and a 0.1% rise ex-auto, based on an MNI survey of analysts. 

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

--GAS PRICES SUGGEST SALES WILL FALL

     Given the strong correlation between gasoline prices from the CPI report

and gas station sales, the 4.9% plunge in gasoline prices points to a high

chance that gas station sales are likely to follow suit, dragging down retail

sales. Adding to the weak gas prices, severe winter weather conditions in March

could be seen in most of the US. The weather likely caused drivers to stay off

the roads, which should translate into further declines in gas station sales.

Another sharp fall in gasoline station sales should again amount to a low

headline retail print. 

--DOWNSIDE RISK TO EX-AUTOS

     In the past ten years, analysts have an even number of over and

underestimates of headline retail sales for March - showing no clear directional

risk. However, there is a downside risk to analysts' estimate of ex-auto sales.

In the past ten March releases, analysts have overestimated ex-auto six times.

This trend is even stronger in recent years, with analysts overestimating

ex-auto for each of the past three Marches. Further, analysts tend to

overestimate ex-auto to a greater degree than they underestimate it, with an

average miss of 0.32 compared to 0.18. 

--MARKET AND ANALYST HISTORY OF OVERESTIMATES

     Market participants expect retail sales to be softer than the median

estimate for analysts, with a whisper number tracking at a 0.2% gain. In the

past year, both analysts and the whisper number have tended to overshoot

headline retail sales. Further, in the past three months the whisper number has

overestimated each time and analysts have overestimated in the last two months -

suggesting another downside risk to retail sales. However, slightly dampening

the chances of the whisper number coming to fruition, markets have a much less

accurate track record than analysts, with an overall average miss of 0.58pp

compared to 0.29pp.

--FIRST QUARTER RETAIL SETS UP FOR SOFT GDP

     If retail sales comes in at analysts' expectations of a 0.3% gain and

January and February figures are unrevised, MNI calculates that Q1 will be up at

a seasonally adjusted annualized basis of 0.6% quarter/quarter, significantly

softer than Q4's comparable 10.4% jump. While first quarter almost always shows

a slowdown from holiday shopping due to residual seasonality, retail sales for

first quarter year/year show that there is also a slowdown from Q1 2017

year/year. Again, assuming that the median forecast is realized, ceteris

paribus, Q1 2018 year/year would post a 4.1% gain, softer than Q1 2017 year/year

5.1% gain. While retail sales do not directly feed into personal consumption,

the weak sales figures suggest a definite slowdown to PCE and Q1 GDP.

--MOTOR VEHICLE SPENDING TO RISE

     The unexpected winter weather did little to deter consumers from buying

autos in March as consumers see more money in their paychecks from tax cuts and

the tight labor market pushing up earnings. Vehicle sales saw a solid 1% rise

over the month, with light trucks driving the gain. Light trucks rose not only

in the month, but were up 16.3% year/year, and up 10% year/year for only

domestic light truck purchases. As vehicle sales track with retail sales in

motor vehicles, motor vehicle spending should see a rise despite new vehicle

prices being flat and used vehicle prices seeing a decline. However, the

expected rise in vehicle sales is likely to be offset by the significant decline

in gas station sales.