US: Where could consensus be surprised on GDP growth?

Research Team at Deutsche Bank, notes that the US September retail sales were much weaker than consensus expectations, and there was a downward revision, as well.

Key Quotes

“Retail control, a subsector of the retail sales report that excludes food services, automobiles, building materials and gasoline sales, was up just 0.3% at an annualized pace last quarter. This was the worst quarterly performance since a similar gain in Q2 2013. Ominously, inflation-adjusted consumer spending expanded only 0.8% that quarter. Is another shockingly small increase in store yet again?

In point of fact, our measure of real retail control declined at a -1.3% annualized rate in Q3, which was the first drop since Q4 2012 (-0.3%), when total inflation-adjusted consumer spending increased just 1.1%.

Trade data through August show the level of net exports improving nearly 4% compared to its Q2 average. If this trend is sustained through September, net exports on the surface could be a meaningful contributor to Q3 output and therefore impart upside risk to our below-consensus estimate. However, our hunch is that net exports will not be as additive as the monthly trade data suggest because essentially the entire Q3 improvement has been due to record food exports.

In point of fact, exports of foods, feeds and beverages is up at a 400%-plus annualized rate over the last two months. Importantly, the gain in food exports does not jibe with data on either food production as measured by the Fed's industrial production data or the monthly figures on nondurable goods shipments and inventories. Consequently, this is another category within Q3 GDP where the consensus of forecasters could be disappointed.”

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