October’s Retail Sales: The Devil’s in the Details

As I mentioned in my week ahead, retail sales would likely set the pace for the week, and we received the data this morning. Retail sales rose +1.4% in October, compared to a revised -2.3% change in September (originally -1.5%). This was well above the latest Bloomberg consensus forecast of +0.9%,however, this good news was at least partially offset by the prior month’s revisions.

Retail sales x-autos climbed only +0.2% during the month, after rising a revised +0.4% in September (previously reported +0.5%). This was below the Bloomberg consensus forecast of +0.4%.

The good news is that the ex-auto’s index has gradually continued to trend higher since its collapse the end of last year.  The not so good news is that most all of October’s gains came from auto sales, which were recovering from a sharp drop in September caused by the expiration of the US government’s ‘Cash for Clunkers’ program-it is very unlikely these type of increments will be sustained.  Additionally, downward revision to past sales data will likely cause 3Q09 GDP to be revised down 0.1%, which combined with last week’s wider than anticipated trade deficit should lower 3Q09 GDP to 3.0% from 3.5% indicated by the advanced estimate.