The consumer pulled back sharply in September-but it was mostly due to the post-"clunkers" drop in auto sales. Otherwise, the numbers were surprisingly healthy for the most part. Overall retail sales in September dropped 1.5 percent after a 2.2 percent spike the month before. The September drop in sales was not as severe as the market forecast for a 2.1 percent fall. The decline was led by a 10.4 percent plunge in auto sales after a 7.8 percent boost in August. Excluding motor vehicles, retail sales advanced 0.5 percent, following a 1.0 percent jump in August. The consensus had expected a 0.3 percent rise for September.
Checking on the other volatile component, gasoline sales provided lift, gaining 1.1 percent in the latest month. Nonetheless, excluding motor vehicles and gasoline, retail sales rose 0.4 percent, following a 0.6 percent gain the previous month. Although core components were mixed, they were mostly positive and reflected sizeable gains. Apparently, the consumers that have jobs are a little more optimistic and are willing to spend.
We now have had two months of unexpectedly healthy core sales. Components outside of autos and gasoline were actually led by furniture & home furnishings, up 1.4 percent; general merchandise, up 0.9 percent; and health & personal care, up 0.8 percent. Gains were also seen in food & beverage stores, clothing & accessories, sporting goods & hobbies, and food services & drinking places. Declines were seen in building material & garden shops, miscellaneous stores retailers, and nonstore retailers.
Overall retail sales on a year-ago basis in September improved marginally to down 5.7 percent, from down 5.8 percent in August. Excluding motor vehicles, the year-on-year rate increased to minus 4.9 percent in September from down 6.3 percent the previous month.
Equities should like today's report since the number beat expectations but also should get a lift from Intel beating estimates after yesterday's close and JP Morgan doing the same before this morning's open. The dollar firmed on today's news as did Treasury yields.
Recent History Of This Indicator
Retail sales were stronger than expected in August—boosted by cash-for-clunkers and higher gasoline prices. Overall retail sales jumped 2.7 percent in August, following a 0.2 percent drop the previous month. Government incentives jacked up auto sales a huge 10.6 percent for the latest month. Excluding motor vehicles, retail sales were still strong, rebounding 1.1 percent, following a 0.5 percent fall in July. But the news will likely be mixed for September as motor vehicle sales plunged sharply in September. But department store sales were up for the month and could lead the ex-auto number up.