By the Numbers

Featuring brief segments of economic analysis from our senior economist Michael Bazdarich, PhD.

Sign up to receive an email as pertinent data are released.

October Retail Sales Show Decent Gains

Retail sales rose just less than 0.2% in October, and September sales were revised upward by 0.3% to a 1.9% revised gain. For the less volatile “control” sales measure we track, excluding vehicles, gasoline, and building materials, sales rose just less than 0.4%, with September revised up by just less than 0.1%, to a 0.4% gain.

The September gain in headline sales was driven by an incentive-induced bounce-back in car sales and hurricane-driven increases in gas prices. So these factors didn’t affect “control” sales, which showed decent but more modest gains in recent months.

As seen in the accompanying chart, sales growth has been generally steady for quite some time, with six-month growth rates for control sales stuck around the 3.4% rate for most of the last two years. 3.4% is actually a pretty decent rate of growth, but the steadiness of this pace belies claims that the economy is accelerating.

We will admit that capital spending has looked better lately, but that has largely been offset by slower growth in both residential and nonresidential construction. So the 3% GDP growth seen over the last two quarters is partly a bounce-back from a sluggish 1Q17 rate and partly due to a surge in inventories. We do not expect the inventory surge to continue, and it may even be reversed in coming months. In any case, there is no sign of an acceleration on the consumer spending front.

While aggregate sales growth was in line with preceding trends, store-type details provided an interesting contrast with recent experience. Sectors that had been soft showed nice gains, such as grocery, apparel, electronic, and book/sporting goods stores. At the same time, sectors that had been doing well saw sales declines, namely the high-flying online sector, but also building materials stores. Is this a sudden divergence in retail trends or merely a random blip? Our money is on the latter explanation, but we’ll wait for coming months’ data to tell us for sure.

Retail Sales Trends
Retail Sales Trends

Source: Census Bureau, as of 31 Oct 17. “Control” retail sales is total sales less vehicle dealers, service stations and building materials stores.

Michael Bazdarich

Product Specialist/Economist

Mike brings more than 40 years of experience to his position. "By the Numbers" will address economic data releases that are pertinent to a broad range of investors.

Prior to joining the Firm in 2005, Mike ran his own consulting firm, MB Economics. He earned his PhD in Economics at the University of Chicago.

Sign up to receive an email as pertinent data are released.

© Western Asset Management Company 2017. This publication is the property of Western Asset Management Company and is intended for the sole use of its clients, consultants, and other intended recipients. It should not be forwarded to any other person. Contents herein should be treated as confidential and proprietary information. This material may not be reproduced or used in any form or medium without express written permission.
Past results are not indicative of future investment results. Investments are not guaranteed and you may lose money. This publication is for informational purposes only and reflects the current opinions of Western Asset Management. Information contained herein is believed to be accurate, but cannot be guaranteed. Opinions represented are not intended as an offer or solicitation with respect to the purchase or sale of any security and are subject to change without notice. Statements in this material should not be considered investment advice. Employees and/or clients of Western Asset Management may have a position in the securities mentioned. This publication has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information, you should consider its appropriateness having regard to your objectives, financial situation or needs. It is your responsibility to be aware of and observe the applicable laws and regulations of your country of residence. Potential investors in emerging markets should be aware that investment in these markets can involve a higher degree of risk. Any forecast, projection or target is there to provide you with an indication only and is not guaranteed in any way.
Western Asset Management Company Distribuidora de Títulos e Valores Mobiliários Limitada is authorised and regulated by Comissão de Valores Mobiliários and Banco Central do Brasil. Western Asset Management Company Pty Ltd ABN 41 117 767 923 is the holder of the Australian Financial Services Licence 303160. Western Asset Management Company Pte. Ltd. Co. Reg. No. 200007692R is a holder of a Capital Markets Services Licence for fund management and regulated by the Monetary Authority of Singapore. Western Asset Management Company Ltd is a registered financial instruments dealer whose business is investment advisory or agency business, investment management, and Type II Financial Instruments Dealing business with the registration number KLFB (FID) No. 427, and members of JIAA (membership number 011-01319) and JITA. Western Asset Management Company Limited (“WAMCL”) is authorised and regulated by the Financial Conduct Authority (“FCA”). In the UK this communication is a financial promotion solely intended for professional clients as defined in the FCA Handbook and has been approved by WAMCL.