U.S. retails sales seem to have recovered in October

U.S. retail sales are expected to have recovered in October. In the previous month, solid rises in spending on motor vehicles and at gasoline stations increased the headline retail sales print to 0.6 percent, which was a three-month high; however, it was not sufficient to offset a third consecutive disappointing result in the control series. That metric rose slightly by 0.1 percent in September after falling 0.1 percent and 0.2 percent in August and July respectively.

In the third quarter, the control group averaged a month-on-month change of -0.08 percent as compared with 0.59 percent in the second quarter. But over one third of the deceleration was because of the non-store retailers’ category. Even there, it was a 0.1 percent decline in August that drove its third quarter average pace down significantly.

Before that fall, this series had not registered a negative print since January 2015. Including the August decline, the six-month average continued to stay at 1 percent, whereas the longer 12-month average remained at 0.8 percent. After that August decline, the series rebounded by 0.3 percent; however, the retail sales are expected to have gained strongly in October, noted Societe Generale in a research note.

Grocery stores sales in the third quarter slowed from the second quarter, which might be a function of the ongoing drop in food prices. However, there is a possibility of a slightly firmer print in October. Sales at health stores recorded a rare decline of 0.46 percent in September, the first decline in that category since January. In all, these three series accounted for more than two-thirds of the slowdown in the control group in the third quarter.

Unit auto sales rose in October by 1.5 percent, which might have resulted in a 0.8 percent rise in auto dealers’ receipts in the period. In the meantime, seasonally adjusted gasoline prices rose by around 6.5 percent in October, which might have stimulated gasoline station sales by about 3 percent.

“Retail sales may have advanced by 0.7 percent in October, while they may have climbed by 0.4 percent excluding autos and gasoline. The control group could have increased by about 0.5 percent”, added Societe Generale.