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Monday, July 15, 2013 12:24 PM

Big Miss in Retail Sales vs. Expectations; Trend Change or Another "Soft Patch"?

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Retail sales were up 0.4% in June compared to Bloomberg estimates of +0.8%. May retail sales were revised lower, to +0.5% from an originally reported +0.6%.

The increase seems healthy enough until you dive into the details. Here are some retail sales comments from Bloomberg to help put things into perspective.

  • Restaurants and bars decreased 1.2 percent in June, the most since February 2008.
  • Sales dropped 2.2 percent at building materials outlets, the most since May 2012.
  • Purchases at department stores declined 1 percent in June.
  • Retail sales excluding autos and gasoline unexpectedly fell 0.1 percent.
  • Purchases rose 2.4 percent at furniture and home furnishing chains, the most since May 2012.
  • Automobile dealer sales rose 1.8 percent
  • Purchases excluding autos, gasoline and building materials, which render the figures used to calculate gross domestic product, rose 0.1 percent after a 0.2 percent increase in the previous month.

That last bullet point explains why the next GDP number will likely be below stall speed.

Yet economists still predict the US economy will expand at 2.3% in the third quarter. I will take the under (not that there is much meaning to GDP numbers in the first place).

Census Bureau Report

Let's now take a look at some charts from the ADVANCE MONTHLY SALES FOR RETAIL AND FOOD SERVICES JUNE 2013 report by the Census Bureau.

Retail Sales vs. Previous Months

Retail Sales vs. Last Year

Retail Sales Synopsis

BusinessPercent Change
June 2013 Advance FromMay 2013 Preliminary From
May 2013June 2012April 2013May 2012
Total (excl. motor vehicle & parts)
Retail  0.660.74.4
Motor vehicle & parts dealers  1.811.41.48.2
Auto & other motor veh. dealers
Furniture & home furn. stores  2.44.6-0.40.3
Electronics & appliance stores  -0.1-0.3-1-0.8
Building material & garden supplies-
Food & beverage stores -
Grocery stores  -
Health & personal care stores  0.230.51
Gasoline stations
Clothing & clothing accessories0.74.8-0.14.9
Sporting goods, hobby, book & music0.
General merchandise stores
Department stores (ex. L.D.) -1-5.1-0.2-4.3
Miscellaneous store retailers  -
Nonstore retailers
Food services & drinking places  -1.23.1-0.64.4

Trend Change or Another "Soft Patch"?

Note the numbers for motor vehicles and parts dealers, and also for auto and other motor vehicle dealers vs the rest of retail sales.

How sustainable are those numbers? I suggest not very. Next note furniture and home furnishing stores.

Strength in those numbers reflects the strength in housing. How sustainable is housing with the huge rise in mortgage rates in the last month? Once again, I suggest not very.

Yet, the consensus view is this somehow represents a bottoming action in the economy rather than a topping action. Time will tell which view is accurate.

Mike "Mish" Shedlock

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