Goldman’s Jan Hatzius comments on today’s strong retail sales.
1. Retail sales increased by 1.1% (month-over-month) in September, helped in part by strong vehicle sales. Retail sales of motor vehicles and parts rose by 3.6%, following a 0.8% decline in August. However, sales growth was also firm outside of autos. Non-auto retail sales rose by 0.6%, and “core” retail sales (ex-autos, gas and building materials) rose by 0.5%. Sales of apparel, furniture and department store products accelerated. On top of healthy September sales, earlier months were revised up significantly.
2. Before the retail sales figures, available data pointed to some downside risk to our 2.5% forecast for Q3 GDP growth. Incorporating today’s numbers as well as revisions to earlier months, we now see moderate upside risk to our Q3 GDP call. However, from a broader perspective we would emphasise that the trend in real retail sales growth has not been particularly strong: deflating retail sales by the CPI for goods, for example, shows the level of sales roughly flat in recent months.
3. Separately, import prices increased by 0.3% in September, in contrast to consensus expectations for a 0.4% decline. Commodity-related prices rose, but prices of finished consumer goods imports gained as well.