U.S. retail sales likely to have rebounded in September

U.S. retail sales are expected to have rebounded in September after it declined for the second straight month in August when the headline figure dropped 0.3 percent. The control group had also dropped 0.1 percent. Out of the ten categories in the control group, six recorded a decline in August; however, the bulk of the weakness was focused in the miscellaneous stores and non-store retailers sectors.

The non-store retailer sector recorded 0.3 percent decline, the first decline since January 2015 and quite below the trailing three-month average rise of 0.9 percent. Therefore, it appears irregular and unlikely to have repeated in September. But the miscellaneous stores category has remained weak in recent months, and August was the third drop in the past four months. However, this is quite an uneven series and remains 2.3 percent up since December. Thus it is expected to have recovered slightly in September, noted Societe Generale in a research report.

Meanwhile, there is possibility that both autos and gasoline categories grew strongly in September. Unit auto sales increased 4.4 percent last month, significantly retracing the August drop and might have risen around 5 percent in September, which might have stimulated sales at gasoline stations by about 2.5 percent.

“Overall, retail sales may have advanced by 0.7 percent in September, while they may have posted a more modest rise of 0.3 percent excluding autos and gasoline”, added Societe Generale.

The control group might have climbed around 0.4 percent. A reading consistent with this forecast and assuming no revisions to earlier months might leave the control group around 1.2 percent annualized above second quarter, the weakest performance since the second quarter 2013.

Still, if increase in services spending in September could hold the average rate seen in this quarter so far, the real PCE then would be on track to grow 2.7 percent in the third quarter, consistent with the earlier four-quarter average, according to Societe Generale.