Friday, March 12, 2010

US Retail Sales: February Surprise

US Retail Sales surprised in February, beating concerns about the affects of the cold snap and icy weather and a poor labour market; coming in above consensus. In February 2010 retail sales climbed 0.3% month on month to US$355,546 million, against consensus estimates for a fall of -0.2% and January's growth rate of 0.5%.

Core retail sales (less autos) also beat consensus with 0.8% against an expected 0.0%. Headline and core retail sales were up 3.5% and 3.7% respectively. The winning categories were electronics & appliances stores, miscellaneous store retailers, food & beverages, and sporting goods, hobby, book & music stores.

But one must keep in mind that the base comparison period is much lower than in previous years. The chart below shows on the three major counts of retail sales that neither of them are near were they were prior to the crisis. So the message is recovery; yes, but certainly below trend. But there is momentum there with 4 positive annual growth rates in a row, and 2 positive monthly growth rates in a row.

The outlook for retail spending in the US is likely to be relatively subdued with plenty of upside and downside surprises as the recovery proceeds in a stop-start manner. As consumer lending and credit remains reasonably lackluster, and the deleveraging cycle continues to play through, the growth potential here will likely also be capped. But there are positive factors at play too, for example the hiring for the 2010 10-year census may provide some respite to the US consumer.

As previously noted though, we're still looking for the "new mix" or "new normal" to play out with consumer spending taking a backseat to savings, business investment, and net exports as drivers of a sustainable and structural recovery in the US.

US Census Bureau Econ Grapher Analytics

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