After three months of gains, Hurricane Sandy brought a decline in October retail sales.
On Wednesday, the Commerce Department’s Census Bureau released its report on Retail Sales for October. Although economists had been anticipating a 0.2 percent decline (and for sales excluding automobiles to increase by 0.1 percent) the report indicated a decline of 0.3 percent. Nevertheless, you must keep in mind that the September figure was adjusted upward from a 1.1 percent increase to a 1.3 percent increase. As a result, the actual decline for October was 0.1 percent less than September, because the economists were not aware of that extra 0.2 percent for September when they made their estimates. Nevertheless, there was still a decline of 0.1 percent from the preliminary September figure and it was the first decline after three months of advances. After disregarding the 1.5 percent drop in October auto sales to reach the “ex auto” result, the retail sales ex auto figure remained unchanged from September. Did Superstorm Sandy Sandbag October’s Retail Sales?
On the bright side, retail sales increased by a whopping 3.8 percent from October of 2011. Retail Sales: First Decline in Four Months
From the report:
The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for October, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $411.6 billion, a decrease of 0.3 percent (±0.5%)* from the previous month, but 3.8 percent (±0.7%) above October 2011. Total sales for the August through October 2012 period were up 4.7 percent (±0.5%) from the same period a year ago. The August to September 2012 percent change was revised from 1.1 percent (±0.5%) to 1.3 percent (±0.2%).
Retail trade sales were down 0.3 percent (±0.5%)* from September 2012, but 3.8 percent (±0.8%) above last year. Gasoline stations sales were up 7.7 percent (±1.7%) from October 2011 and nonstore retailers were up 7.2 percent (±3.0%) from last year.
Also on Wednesday, the Bureau of Labor Statistics released its Producer Price Index for October. The PPI is also referred to as the “wholesale price index”. Although economists had been expecting an increase of 0.1 percent overall and an identical increase in “core” prices (excluding food and energy) both categories declined by 0.2 percent. After four months of gains, the result was well-received as non-inflationary.
The Federal Reserve’s FOMC released the minutes of its October 23-24 meeting on Wednesday. No significant new information was revealed and, as usual, the sole dissenting member was Richmond Fed President Jeffrey Lacker.
From the FOMC Minutes:
In their discussion of monetary policy for the period ahead, Committee members generally agreed that their overall assessments of the economic outlook were little changed since their previous meeting. Accordingly, all but one member judged that maintaining the current, highly accommodative stance of monetary policy was warranted in order to foster a stronger economic recovery in a context of price stability. The Committee judged that continuing both the purchases of MBS at a pace of $40 billion per month and the existing program to extend the average maturity of its Treasury securities holdings remained appropriate. The Committee also agreed to maintain its policy of reinvesting principal payments from its holdings of agency debt and agency MBS into agency MBS. One member opposed further asset purchases because he viewed them as unlikely to help the Committee achieve its goals and because he thought that purchases of MBS represented inappropriate credit allocation.
The major ETFs expected to respond to the Census Bureau’s Retail Sales report for October are:
SPDR S&P Retail ETF (NYSEARCA:XRT) -1.21%
Market Vectors Retail ETF (NYSEARCA:RTH) -1.03%
Consumer Discretionary Select Sector SPDR Fund ETF (NYSEARCA:XLY) -1.62%
Consumer Staples Select Sector SPDR Fund ETF (NYSEARCA:XLP) -1.10%
Bottom line: Although retail sales declined slightly during October, the result was understood to be a consequence of Hurricane Sandy. On a year-over-year basis retail sales increased by 3.8 percent.