US retail sales whiff

US retail sales were lower than expected in October.

Retail sales grew 0.1% month-on-month, and core sales, excluding autos and gas, rose 0.4%.

Core sales for September were revised lower to -0.4% from -0.3%.

Economists had estimated that headline retail sales rose 0.3% compared to the prior month, higher than the previous growth rate of 0.1%.

Excluding the volatile costs of automobiles and gas, they had forecast that core retail sales rose 0.4% month-on-month.

The report’s details were fairly good, with most sectors seeing some growth. Gasoline sales fell 0.9% as gas prices fell.

This is perhaps the most exciting data release of the week, as it is a top-tier report that would give us some insight into consumer spending, which constitutes about two-thirds of gross domestic product.

But it may not even matter. Pantheon Macroeconomics’ Ian Shepherdson noted on Thursday that the retail sales data make up only about half of consumer spending.

Sheperdson wrote in a client note Thursday: “Falling goods price – especially gasoline, but also import-intensive components like clothing and electronics — have boosted real sales. Also, people have spent some of the cashflow released by falling goods prices on non-retail services like leisure activities. In short, it is very risky to use retail sales as a proxy for real consumption — which is what really matters — when goods prices are falling.”

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