US Q4 GDP tracking 2.4% after soft October retail sales

US retail sales rose 0.1 m/m in October, which came less than forecast (0.4%) and the consensus expectation(0.3%). Sales at motor vehicle and parts dealers (-0.5 m/m, previous: 1.4%) and gasoline stations (-0.9% m/m, previous: -4.0%), which together account for almost 30% of total retail sales, were both weaker than expected on the month. Disappointing results for these two categories say little about the underlying trend in real consumer spending.

Gasoline station sales fluctuate with retail prices, while motor vehicle retail sales are often affected by promotional pricing and sales of parts and accessories. Manufacturers' reports of 18.1mn units (saar) in light weight vehicle sales suggest that real durable goods consumption remained healthy through October. Excluding autos and gas, retail sales were up 0.3% m/m in October.

The retail sales control group (0.2% m/m, forecast: 0.4%), our preferred measure of core sales, rose less than we had expected as prior months' results were revised higher. September core sales are now estimated to have risen 0.1% m/m (initial: -0.1%) and August results received a modest boost as well. The details of this morning's report suggest that key areas of discretionary spending retain positive momentum.

Non-store retailers saw the fastest pace of sales growth in three months (1.4% m/m, previous: 0.3%) and restaurant sales expanded as well (0.5% m/m, previous: -0.2%). Department stores (0.3% m/m, previous: 0.4%), sporting goods stores (0.4% m/m, previous: 1.3%) and furniture retailers (0.4% m/m, previous: 0.6%) all reported gains in nominal sales.

The revisions to core retail sales for August and September suggest a slightly stronger pace of goods consumption than the advance estimate of Q3 GDP contained. However, better core goods consumption was offset by downward revisions to restaurant sales.

"Our Q3 GDP tracking estimate was unchanged. October core sales came in below our expectations, implying a bit less consumption growth in Q4. Our tracking estimate of Q4 real PCE growth fell two-tenths to 2.8% and our Q4 GDP tracking estimate fell one-tenth to 2.4%", says Barclays.