Retail Sales: 2Q Revised Lower But 3Q Starts Strong

Bottom Line: Retail sales were stronger than expected in July, but most of the surprise was offset by negative revisions to 2nd Quarter data. Despite the take from the 2nd Quarter and give to the 3rd Quarter, the overall trend remains towards a moderate acceleration in the trend in retail sales. The only sectors offering some negative news are furniture and sporting goods -- sporting goods and hobbies have seen slower sales for several years now, but the turn towards slower home furnishing sales has been sharp in the last 3 months and is consistent with moderately slower housing activity seen in other data. This sector bears watching going forward - but for now the core trend remains solid, including an acceleration in the building materials and garden supply sectors that runs somewhat counter to the furnishing segment. Retail Sales ROSE by 0.5% in July, compared with the market consensus for an increase of 0.1%. The June estimate was revised lower from 0.49% to 0.20%. Retail sales are now 6.4% ABOVE their year ago level; just a year ago, the year over year growth rate was 3.7%. Spending at motor vehicle dealers climbed by 0.2%. Core Retail Sales ROSE by 0.6%, compared with the market consensus for an increase 0.3%. The June estimate was revised lower from 0.39% to 0.21%. Core retail sales are now 7.2% ABOVE their year ago level; just a year ago, the year over year growth rate was 3.6%. In July, gains at

• nonstore retailers (+0.8%),
• general merchandise stores (+0.7%),
• grocery stores (+0.6%),
• gasoline stations, primarily due to high gasoline prices (+0.8%).

were partially offset by declines in

• health and personal care (-0.4%),
• sporting goods, hobbies, etc. (-1.7%),
• furniture & home furnishing (-0.5%), and
• miscellaneous retailers (-0.3%).

Core Retail Sales ex Gasoline ROSE by 0.56% and are now 5.6% ABOVE their year ago level; just a year ago, the year over year growth rate was a moderate 3.8%