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That dismal June retail sales report is causing a mass GDP-forecast-slashing parade on Wall Street.Here’s Goldman’s Jan Hatzius…
Retail sales declined by 0.5% (month-over-month) in June, while the consensus had looked for a 0.2% gain. Key details of the report were also weaker: non-auto retail sales declined by 0.4%, and growth in April was revised down. Similarly, “core”/control retail sales (ex-autos, gasoline and building materials) was weak, declining 0.1% in June. The weakness reflected lower sales across a variety of categories, including general merchandise stores, electronics, furniture, sporting goods stores, and health and personal care retailers. Merely food and beverages, clothing, and non-store retailers posted gains on the month. The report was a negative for our tracking estimate of Q2 GDP growth, which we reduced by two tenths to 1.1%.
And here’s Deutsche Bank’s Joe LaVorgna…
June retail sales were much softer than expected, which obviously has further negative implications for Q2 economic output. Headline retail sales fell -0.5% as motor vehicle sales were down -0.6%. Excluding autos, sales were down -0.4%, as there was broad-based weakness across the various subcomponents: furniture (-0.8%), electronics (-0.8%), building materials (-1.6%), health/personal care (-0.7%), sporting goods (-1.6%), general merchandise (-0.2%) and restaurant (-0.2%) all fell; gasoline spending was down (-1.8%), but this was not a surprise given the weakness in retail gas prices which over time is a positive for households. Retail control, which is the direct input used by the Commerce Department in estimating real GDP—it is defined as retail sales less autos, building materials and gasoline—fell -0.1%. This was after a flat reading in May and a -0.1% decline in April. Note that March retail control was up 0.3%. With respect to revisions, May was basically unrevised, but April was revised down: headline and ex auto sales were lowered -0.3% in April to -0.5% and -0.6%, respectively. The net effect of weaker than expected retail sales, inclusive of revisions, is less Q2 consumption which we are tracking at +1.3%. This is down from our previous estimate of +1.8% and causes us to lower our forecast of Q2 real GDP by another 0.4% to +1.0%.
According to the Census Bureau, retail sales declined for a third straight month in June, declining by 0.5% following an unrevised decline of 0.2% in May and a downwardly revised decline of 0.5% in April. The weaker-than-expected June data in addition to downward revisions have lowered our Q2 GDP tracking model to 1.2% from 1.3% previously.
Via Reuters, here’s HSBC:
Consumer spending slowed abruptly in Q2. Consensus estimates of GDP growth in Q2 are likely to be lowered to 1.5% or less, down from growth of +1.9% in Q1. Pressure on the Fed to provide additional monetary accommodation will increase.
And via Jim Pethokoukis…
BOOM! JPMorgan absolutely axes its 3Q GDP forecast to 1.5% from 2.0%
— James Pethokoukis (@JimPethokoukis) July 16, 2012