US: Retail sales to be influenced by several major factors – BMO CM

Michael Gregory, Deputy Chief Economist at BMO Capital Markets, suggests that the forthcoming release of US September retail sales are going to be influenced by several major factors.

Key Quotes

“First, there’s the replacing and rebuilding of goods and property damaged by Hurricane Harvey. For example, by Autodata’s tally, vehicle sales surged 15% to 18.6 million units (annualized), the highest level in more than a dozen years. Second, there’s Hurricane Irma which made landfall on September 10th and restrained retail activity as it made its way up Florida and into other Southeastern states. However, this will be partly offset by a surge in outlays related to battening down the hatches (think hardware and grocery stores) and evacuating (think hotels and restaurants); and, toward the end of the month, by the replacing and rebuilding of damaged goods and property. Third, nationwide, receipts at gasoline retailers will be inflated by the more than 15% surge (seasonally adjusted) in average gasoline prices.”

“Fourth, in the opposite direction, receipts at grocers should be depressed by more aggressive discounting in response to Amazon’s announced price cutting at Whole Foods. Fifth, although iPhone 8 sales appeared to pale in comparison with previous versions, with iPhone X’s release looming, it should still provide at least a bit of a boost for some vendors. Taking all of the above into account, along with supportive income growth, healthy household balance sheets and elevated levels of consumer confidence, we end up with the following… Headline retail sales up 2.6% (fastest in more than 11½ years), driven by automotive sales (1.9% ex-autos) and fuelled further by gasoline sales (0.5% ex-autos & gas). The latter is a solid result.”