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Trend Signals Still Point North


BLOCK, Red Pack


Corporate Debt Recap, World Bank Exp Wednesday


Resumes Its Downtrend


Corrections Remain Shallow

By Holly Stokes
     WASHINGTON (MNI) - Retail sales are generally expected to creep back up
after modest declines in the previous two months, an MNI survey of analysts
     Analysts see headline retail sales posting a 0.3% increase, a rebound from
June's 0.2% decline. The same improvement is seen for retail sales excluding
motor vehicles, which is also expected to rise 0.3% after June's 0.2% dip.
     In June, retail sales faced a downward miss as consumer spending lagged
behind job creation and wage growth. Since wages have continued to rise,
analysts such as RBC believe that July's retail sales should now begin to match
wage gains. The jump in the Conference Board's measure of Consumer Confidence to
121.1 seems to confirm that consumers have a better outlook. However, July's
Michigan Consumer Sentiment saw a small dip to 93.4 from June's 95.1. 
     Since auto sales are a large portion of retail sales, analysts will watch
auto sales with close scrutiny to see if their expectations of modest growth are
confirmed. CIBC notes that a pickup in volume will be largely offset by a
decline in prices - as suggested by July's CPI report on Friday, which showed a
0.5% decrease in both new and used vehicles. However, National Bank of Canada,
which forecasts a strong 1.0% increase in retail sales, states that this rebound
will be largely supported by auto sales. 
     Last month gas prices saw a 1.3% drop, making it the biggest drag to June's
retail sales. While seasonally adjusted gas prices have begun to steady from the
past two months' declines, many analysts still expect gas station sales to be
flat or weak. Morgan Stanley states that sales at gas stations will continue to
be hit, as regular grade gas prices were down three cents on average in July.
     Analysts expect that retail sales should be led by a strong control group,
which feeds directly into GDP. In particular, e-commerce is expected to post
above trend gains. With Amazon reporting US prime day sales up 50%
year-over-year, Credit Suisse expects an upside risk to estimates. 
     Watching retail sales, analysts vary on expectations for Q3 consumption.
Many analysts believe that consumer recovery will remain solid, and be a key
driver of growth. RBC notes that there is an upside risk to the expected 2.4% Q3
consumption, and TD Securities states that a strong core retail sales would
align with a real PCE of at least 2.5% - supporting above-trend growth
expectations. However, NatWest believes that a sustained accelerated spending
pace above 2.0 to 2.5% is unlikely. Societe Generale mirrors this belief,
stating that they expect a modest rebound in retail sales to start Q3 spending
at a subdued pace.
--MNI Washington Bureau; +1 202-371-2121; email: