- March retail sales surprised negatively with lower-than-expected readings on the headline and ex autos. Upward revisions to the prior months offset some of the decline but the net result remains a negative surprise. Some caution is warranted in interpreting today's data as this year's late Easter could distort seasonal adjustments.
- The general impression remains that real personal spending has stabilised and with today's data we revise our Q1 estimate for private consumption up to 1.6% q/q AR from a previous 0.5% decline. However, March data leaves a weak starting point for Q2.
- Consumers should receive the first tax stimulus in the current month and going forward fiscal relief combined with lower energy prices and mortgage refinancing should help to support the US consumer in the coming months.
Details: While total retail sales disappointed our and consensus expectations in March, upward revisions to prior months offset some of the weakness. January retail sales data was revised up by 0.1pp to 1.9% m/m while February sales were revised up by 0.4pp to 0.3% m/m. One caution though, the timing of Easter can vary, which makes March and April numbers particularly volatile, averaging the two months might provide a better gauge of the real trend in sales.
We had expected the pick-up in unit auto sales to feed through into the headline data for retail sales, but apparently prices were slashed heavily in March leading to a nominal decline of 2.3% on the month. Other major drivers of the decline were a price-related 1.6% m/m decline in gasoline sales and sales of electronics down 5.9%, but weakness was also seen in other parts of the report. Adjusting for the most volatile parts of sales, the "core" measure of retail sales (ex gasoline, building materials and autos) was down 0.9% m/m following two months of increase (see upper chart).
Assesment & Outlook: The March data is consistent with an increase in nominal personal spending of 0.18% m/m. With consumer prices set to post a 0.1% m/m increase, this suggests that real consumer spending will probably be marginally up by 0.08% m/m. Combined with the revisions to January and February data this implies an upward revision to our Q1 estimate for private consumption to +1.6% q/q AR from our current forecast of -0.5% q/q AR.
Consumers continue to face severe headwinds from a weak labour market, negative wealth effects and tight credit conditions. However, the boost from tax reliefs, lower inflation and mortgage refinancing should support consumer spending in the coming months. The starting point for consumer spending going into Q2 is weak, but we continue to look for positive private consumption growth in the coming quarter.
Danske Bank
http://www.danskebank.com/danskeresearch
Disclaimer
This publication has been prepared by Danske Markets for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Markets´ research analysts are not permitted to invest in securities under coverage in their research sector. This publication is not intended for private customers in the UK or any person in the US. Danske Markets is a division of Danske Bank A/S, which is regulated by FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange. Copyright (©) Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.
