Paulo's Econ Watch

Showing all posts tagged #retail-sales:

US Mar/2016 retail sales weaker than consensus (again)

Posted on April 13th, 2016

Main takeaways (http://bit.ly/us-retail-mar16)

March retail sales weaker than consensus (again).
Expectations for consumption had already been revised down after the weak Jan/Feb PCE report; today's retail sales report do not change that, despite some upward revision to the previous couple of months.
This weakening of consumption is somewhat puzzling given the strong income and employment, high level of consumer confidence, and credit still flowing.
Softer retail sales can be attributed to tighter financial conditions until Jan/Feb...
...but, in my view, the bulk (i.e., not all) of the current slowdown continues to be driven by gasoline sales...
...and, perhaps, by some seasonal adjustment issues.

Charts in the link: http://bit.ly/us-retail-mar16

US Feb/2016 retail sales weaker than consensus

Posted on March 15th, 2016

Main takeaways (http://bit.ly/US_Retail_Feb_2016)

February retail sales weaker than consensus; cumulative sales in Dec/Jan revised lower.
Most sell-side analysts revised their consumption estimates down, taking a couple of tenths out of expected GDP growth for 1Q 16 (currently in the 1.4% to 2.5% range).
Softer retail sales can be attributed to tighter financial conditions and some setback in consumer confidence…
…but, in my view, the bulk of the current slowdown continues to be driven by gasoline sales (retail gas prices dropped 10% in February).

Charts in the link: http://bit.ly/US_Retail_Feb_2016

US: tight financial conditions have not (yet?) shaken retail sales

Posted on February 12th, 2016

Main takeaways:

January retail sales were a positive surprise.
The numbers:
- advance retail sales increased 0.2%mom, a bit better than market consensus; December was revised up from -0.1% to 0.2%mom gain;
- excluding gasoline stations, sales increased 0.4%mom and December was revised from flat to +0.2%;
- control group increased 0.6%mom well above +0.3% consensus, more than offsetting December's -0.3%mom report.
Trend growth remains unchanged:
- 12-month growth of total retail sales ex gasoline stations increased from 4.6% to 4.8%.
- 12-month growth of the 'control group' remained at 3.3%.
- Both trends are very close to the 4-year growth pace: consumers remain resilient!
- Recall that retail prices have trended slightly down -- so the above growth rates understate volume growth!
Despite all the headlines of an inventory problem in the retail sector, inventory-to-sales ratio remained roughly flat (excluding gasoline).

The overall trend for retail sales excluding gasoline at gas stations increased to 4.8% in the last 12 months (from 4.6%). This trend is broadly unchanged compared to the longer (4 year) trend of 4.5% nominal growth.

The chart below compares total retail sales with retail excluding gasoline sales. It is clear that most of the slowdown in retail sales since mid-2015 was due to falling gasoline prices. Moreover, even considering gasoline, sales moved up in Nov/Dec/Jan.

Looking at the "control group" (total retail excluding auto dealers, bldg materials, gas stations) a similar growth picture emerges: 3.3% growth in the last year and 3.0% in the last 4 years.

Excluding residual gasoline sales that are inside the control group (fuel dealers) shows a better picture, with adjusted-control sales growing faster than the number reported.

Also, it is important to recall that (control group) retail prices have been trending down in the last year...

...which results in a very healthy growth rate in retail volumes.

Inventories: stable if one excludes gasoline sales (latest: December)

Extra charts

The charts below show retail and food services by kind of business. The red line is an index in log (averages zero in the period) so that a number 10 in the scale means sales are 10% higher than the period average. The red dashed line is the trend in the last 12 months and the blue bars (right scale) are the monthly percentage change. The headline is how the slope of the red dashed line has changed compared to last two months.

Last 12 months trend moved from 6.4% to 7.2% to 7.6%

Last 12 months trend moved from 5.8% to 6.5% to 5.4%

Last 12 months trend from -1.8% to -2.6% to -2.9%

Last 12 months trend moved from 3.0% to 3.9% to 5.3%

Last 12 months trend moved from 1.8% to 1.5% to 1.7%

Last 12 months trend moved from 3.8% to 4.4% to 4.5%

Last 12 months trend moved from -11.6% to -8.8% to -9.3%

Last 12 months trend moved from 1.8% to 1.7% to 1.6%

Last 12 months trend moved from 7.0% to 8.4% to 8.2%

Last 12 months trend from 2.9% to 2.1% to 2.4%

Last 12 months trend moved from 2.9% to 2.9% to 2.9%

Last 12 months trend moved from 7.2% to 7.2% to 7.3%

Last 12 months trend from 5.9% to 6.4% to 6.3%

US: December was a really bad month for retail; but trend is unchanged

Posted on January 15th, 2016

Main takeaways:

December was a really bad month! But followed a strong November...
The numbers:
- advance retail sales dropped 0.1%mom, in line with market consensus; gave back part of the 0.4%mom gain in November;
- excluding gasoline stations, sales were flat in the month (vs. +0.5%mom in November);
- control group dropped 0.3%mom well below +0.3% consensus; gave back part of the 0.5%mom gain in November.
However, despite monthly disappointment, trend growth remains unchanged:
- 12-month growth of total retail sales ex gasoline stations increased from 4.4% to 4.6%.
- 12-month growth of the 'control group' slowed from 3.4% to 3.3%.
- Both trends are very close to the 4-year growth pace: consumers remain resilient!
- Recall that retail prices have trended slightly down -- so the above growth rates understate volume growth!
Despite all the headlines of an inventory problem in the retail sector, inventory-to-sales ratio remained roughly flat (excluding gasoline).

The overall trend for retail sales excluding gasoline at gas stations increased slightly to 4.6% in the last 12 months (from 4.4%). This trend is broadly unchanged compared to the longer (4 year) trend of 4.5% nominal growth.

The chart below compares total retail sales with retail excluding gasoline sales. It is clear that most of the slowdown in retail sales since mid-2015 was due to falling gasoline prices.

Looking at the "control group" (total retail excluding auto dealers, bldg materials, gas stations) a similar growth picture emerges: 3.3% growth in the last year and 3.0% in the last 4 years.

Excluding residual gasoline sales that are inside the control group (fuel dealers) shows a better picture, with adjusted-control sales growing one percentage point faster than the number reported.

Also, it is important to recall that (control group) retail prices have been trending down in the last year...

...which results in a very healthy growth rate in retail volumes.

Inventories: stable if one excludes gasoline sales (latest: November)

Extra charts

Last 12 months trend moved from 6.7% to 6.4% to 7.2%

Last 12 months trend moved from 5.5% to 5.8% to 6.5%

Last 12 months trend from -3.8% to -1.8% to -2.6%

Last 12 months trend moved from 3.4% to 3.0% to 3.9%

Last 12 months trend moved from 1.9% to 1.8% to 1.5%

Last 12 months trend moved from 4.0% to 3.8% to 4.4%

Last 12 months trend moved from -14.2% to -11.6% to -8.8%

Last 12 months trend moved from 2.6% to 1.8% to 1.7%

Last 12 months trend moved from 6.0% to 7.0% to 8.4%

Last 12 months trend from 2.0% to 2.9% to 2.1%

Last 12 months trend moved from 3.9% to 2.9% to 2.9%

Last 12 months trend moved from 6.7% to 7.2% to 7.2%

Last 12 months trend from 5.6% to 5.9% to 6.4%

US Retail Sales -- excluding gasoline, retail sales are growing at a healthy 4.4%

Posted on December 11th, 2015

Main takeaways:

November: advance retail sales rose 0.2%mom, below 0.3% market consensus; control group increased 0.6%mom above 0.4% consensus.
Trend growth remains unchanged:
- 12-month growth of total retail sales ex gasoline stations increased from 4.3% to 4.4%.
- 12-month growth of the 'control group' rose from 3.1% to 3.4%.
- Both are very close to the 4-year growth pace: a resilient consumer!
- Recall that retail prices are close to flat -- so the above growth rates are close to volume growth!
Inventory-to-sales ratio remained roughly flat (excluding gasoline).

The overall trend for retail sales remains unchanged. Excluding sales at gas stations the trend growth is healthy: 4.4% in the last year compared to 4.5% in the last 4 years (in nominal terms).

The chart below compares total retail sales with retail excluding gasoline sales. It is clear that most of the slowdown in retail sales in the last few months was due to falling gasoline prices (similar to what has happened earlier in the year).

Looking at the "control group" (total retail excluding auto dealers, bldg materials, gas stations) a similar growth picture emerges: 3.4% growth in the last year and 3.0% in the last 4 years.

Excluding residual sales of gasoline from the control group reveals a 1pp growth gap.

Also, it is important to recall that (control group) retail prices have been trending down in the last year...

...which results in a very healthy 3.6% growth rate in retail volumes.

Inventories: stable if one excludes gasoline sales (latest: October)

Extra charts

Last 12 months trend moved from 6.1% (Aug) to 6.7% to 6.4%

Last 12 months trend moved from 5.0% (Aug) to 5.5% to 5.8%

Last 12 months trend from -4.6% (Aug) to -3.8% to -1.8%

Last 12 months trend moved from 1.7% (Aug) to 3.4% to 3.0%

Last 12 months trend moved from 2.7% (Aug) to 1.9% to 1.8%

Last 12 months trend moved from 3.4% (Aug) to 4.0% to 3.8%

Last 12 months trend moved from -19.2% (Aug) to -14.2% to -11.6%

Last 12 months trend moved from 3.6% (Aug) to 2.6% to 1.8%

Last 12 months trend moved from 5.6% (Aug) to 6.0% to 7.0%

Last 12 months trend from 0.8% (Aug) to 2.0% to 2.9%

Last 12 months trend moved from 4.8% (Aug) to 3.9% to 2.9%

Last 12 months trend moved from 6.7% (Aug) to 6.7% to 7.2%

Last 12 months trend from 7.4% (Aug) to 5.6% to 5.9%

US Retail Inventories -- measurement error?

Posted on November 23rd, 2015

US Retail Inventories

There is a growing concern regarding the recent increase of inventories in the US economy, including in the retail sector. A recent article in the WSJ illustrates that: Retailers’ Full Shelves May Force Holiday Discounts.

Main takeaways

Inventory/Sales ratio in the retail sector is increasing since 2012 and jumped substantially since late 2014.
Inventories are reported monthly for kind of business representing 80% of the total inventories in the sector.
Among these business, there is no common trend in the I/S ratio.
Consolidating all those business categories shows a stable I/S ratio in the aftermath of the recession and a minor jump by early 2015.
So the uptrend (and jump in 2015) in I/S ratio is due to “others" – business for which the US Census Bureau does not report monthly breakdown on inventories.
Looking at the breakdown of sales in the “other" business, one can infer that lower gasoline sales (lower prices) are behind the drop in overall “other" sales.
Meanwhile, the US Census Bureau estimates show “other" inventories growing at the same pace as overall inventories – this seems to be an error that is causing the I/S ratio for “other" business to increase materially and affect the shape of the overall I/S ratio that everyone is concerned about.

The bottom line is that the increase in I/S ratio in the retail sector is likely caused by an error in estimating gasoline inventories.

Facts

There’s not much information available on retail inventories. The annual survey breaks down total retail inventories in 12 groups and the monthly survey brings information on just 6 groups that account for around 80% of the total retail inventories.

Total retail sales (excluding food services) was USD 395bn in September/15 (seasonally adjusted). This is equivalent to a pace of annual retail sales of USD 4.7tn (26% of GDP). Retail inventories were USD 584bn in Sep/15 (seasonally adjusted), representing around 1.5 months of sales.

The chart below plots the monthly seasonally adjusted inventories/sales ratio since Jan/1992.

The chart shows that I/S ratio first reached a low of 1.34 months on Oct/2011 and has since increased to 1.48 months (Sep/2015).

It is difficult to square the uptrend in I/S ratio observed since Oct/2011 with the comments in the WSJ report, which only mentions the most recent few months as a reason for concern. It could be the case that the initial build up on I/S ratio was a healthy adjustment in the aftermath of the crisis, but the recent pick up in inventories was an error… however this also does not match the fact that retail sales growth (excluding gasoline) continues in a healthy trend – see US Retail Sales – trend remains unchanged (Oct/2015).

Breakdown of I/S ratio

Total retail inventories are split into the following kind of business:

motor vehicle and parts dealers (33%)
general merchandise stores (15%)
building materials (9%)
clothing (9%)
food and beverages (8%)
furniture,electronics and appliances (5%)
others (21%)

Motor vehicle and parts dealers alone account for about one-third of the retail inventories, but the chart below shows that the increase in inventories/sales is not related to the auto sector (indeed, I/S for the motor vehicle sector has been sideways).

Motor vehicle and parts dealers

General merchandise stores

Building materials, garden equip. and supplies dealers

Clothing and clothing access. stores

Food and beverage stores

Furniture, home furn, electronics, and appliance stores

Others

The remaining category “others" is calculated by residual since its breakdown is not available in the monthly data. The “other" group includes health and personal care; gasoline stations; sporting goods, hobby, book and musical instrument; miscellaneous retailers; nonstore retailers (mail order, online).

Additional comments

One can see that increasing inventories in clothing stores and “others" seem to be behind the overall increase in I/S ratio. Unfortunately, there’s no individual kind of business that dominates the “others" inventories. Based on annual data, “others" inventories are split in:

nonstore retailers (30%)
health and personal care stores (30%)
sporting goods, hobby, and music instrument stores (17%)
miscellaneous store (14%)
gasoline stations (10%)

The chart below plots the I/S ratio for total retail sales excluding motor vehicles and “others". One can see that there was an increase in I/S ratio from late 2014 early 2015 but there is stability in recent months. Moreover, the increase in I/S ratio is materially less pronounced than what is observed in the total I/S ratio (see first chart at the top).

The next chart plots the sales of the “other" categories relative to the total retail sales excluding “other" and vehicles.

The next chart plots the inventories of the “other" categories relative to the total inventories excluding “other" and vehicles.

The charts above illustrate several interesting economic shifts. For instance, the downtrend in I/S ratio of the “other" categories from 2000 to 2008 was led by a faster increase in sales of the “other" categories relative to total sales. This is very likely the result of increasing e-commerce. Indeed, the share of nonstore retailers' sales in the “other" category increased steadily from 25% in 2000 to 38% in 2014.

But for the purpose of understanding why I/S ratio in the “other" categories jumped in late 2014, we need to look further.

The chart below excludes gasoline sales (gas stations and fuel dealers) from the “other" category and plots its sales relative to total sales excluding vehicles and “other". The result? “Other" sales are booming!

The charts above show that “other" inventories are increasing at the same pace of overall inventories but “other" sales collapsed. We learned that the collapse in “other" sales is due to gasoline sales – indeed, “other" sales excluding gasoline are increasing faster than the remaining sales. Unfortunately, the US Census Bureau does not measure monthly gasoline inventories (it is only measured annually) and it seems that they are failing to account for the drop in gasoline inventories as measured in current dollars – since there is no reason to believe that the volume of gasoline inventories has increased substantially in the retail sector to offset the fall in gasoline prices.

Conclusion

The overall tentative conclusion from the charts above is that gasoline inventories are mismeasured and, therefore, are distorting the overall inventory/sales ratio in the retail sector.

Dr. Paulo Gustavo Grahl, CFA (2015-11-23)

US Retail Sales -- trend remains unchanged (Oct/2015)

Posted on November 13th, 2015

Main takeaways:

October: advance retail sales rose 0.1%mom, below 0.3% market consensus; control group increased 0.2%mom vs 0.4% consensus.
Despite being below consensus, trend growth is unchanged:
- 12-month growth of total retail sales ex gasoline stations increased from 4.2% to 4.3%.
- 12-month growth of the 'control group' unchanged at 3.1%.
- Both are very close to the 4-year growth pace: a resilient consumer!
Inventory-to-sales ratio remained stable.

Despite the weaker than expected monthly figures, the overall trend for retail sales remains unchanged. Total retail sales are flat in the last three months, but excluding sales at gas stations the trend growth is healthy: 4.3% in the last year compared to 4.5% in the last 4 years (in nominal terms).

The chart below compares total retail sales with retail excluding gasoline sales. It is clear that most of the slowdown in retail sales earlier in the year and the recent flattening were due to falling gasoline prices.

Looking at the "control group" (total retail excluding auto dealers, bldg materials, gas stations) a similar growth picture emerges: 3.1% growth in the last year and 3.0% in the last 4 years.

Revisions to the previous two months were a small positive.

Excluding residual sales of gasoline from the control group reveals a 1pp growth gap.

Inventories: stable if one excludes gasoline sales (latest: September)

Extra charts

Last 12 months trend moved from 6.1% (Aug) to 6.7%

Last 12 months trend moved from 5.0% (Aug) to 5.5%

Last 12 months trend from -4.6% (Aug) to -3.8%

Last 12 months trend moved from 1.7% (Aug) to 3.4%

Last 12 months trend moved from 2.7% (Aug) to 1.9%

Last 12 months trend moved from 3.4% (Aug) to 4.0%

Last 12 months trend moved from -19.2% (Aug) to -14.2%

Last 12 months trend moved from 3.6% (Aug) to 2.6%

Last 12 months trend moved from 5.6% (Aug) to 6.0%

Last 12 months trend from 0.8% (Aug) to 2.0%

Last 12 months trend moved from 4.8% (Aug) to 3.9%

Last 12 months trend moved from 6.7% (Aug) to 6.7%

Last 12 months trend from 7.4% (Aug) to 5.6%

US Retail Sales -- good; two in a row (Aug/2015)

Posted on September 15th, 2015

Main takeaways:

August: another good retail sales report -- two in a row after the latest FOMC meeting.
Small revisions to the previous two months were positive.
Growth resumed after the winter lull:
- 12-month growth of total retail sales ex gasoline stations increased from 4.0% to 4.2%.
- 12-month growth of the 'control group' increased from 2.4% to 3.1%.
- Both are very close to the 4-year growth pace: a resilient consumer!
Inventory-to-sales ratio remained stable.

Another good retail sales report. Excluding sales at gas stations one can barely see the consumption growth scare that took place earlier in the year: total retail sales ex gas stations increased 4.2% in the last year compared to 4.5% in the last 4 years.

The chart below compares total retail sales with retail excluding gasoline sales. It is clear that most of the slowdown in retail sales earlier in the year was due to falling gasoline prices.

Looking at the "control group" (total retail excluding auto dealers, bldg materials, gas stations) a similar growth picture emerges: 3.1% growth in the last year and 3.0% in the last 4 years.