Retail sales rose 0.2% in August, less than the 0.5% consensus forecast on Bloomberg, and the second consecutive monthly decline. July sales, however, were revised up from 0.2% to 0.4%, making up for a good portion of the headline miss. On a three-month annualized basis, given the strength in June, headline sales are up 5.8% compared to a 4.5% pace in July.
Auto sales rose 0.9% in August, more than reversing last month’s 0.5% decline. Excluding autos, sales rose just 0.1% in August, a disappointing monthly increase following a 0.6% rise the month prior (revised up one-tenth from 0.5%) and the weakest monthly reading since April.
Gasoline station sales were flat in August following a hearty 0.7% increase in July and 0.5% gain in June. Year-over-year, gasoline station sales are down 1.3%. Excluding gasoline stations sales, retail sales were up 0.2% in August. Excluding both gas and autos, sales were up a lackluster 0.1%.
Sales less autos YoY with 6mo avg
In the details: Furniture sales rose 0.9% in August following a 0.8% drop last month, and electronics were up 0.8% after coming in flat in July. Department store sales rose 0.6%, and miscellaneous sales increased 1.0% both reversing July weakness down 0.4% and 0.5% respectively. Health and personal care sales rose 0.6% in August and food and beverage purchases increased just one-tenth. Non-store sales rose 0.5%, and eating and drinking sales increased 0.3% on par with last month’s rise.
On the weaker side, clothing sales plummeted 0.8% in August after a 1% increase the month before, sporting goods sales dropped 0.5% and general merchandise purchases fell 0.2%. Building materials declined 0.9% in August, the third monthly decline in six months.
Bottom line: The first key economic report since Friday’s employment , this morning’s retail sales report was disappointing as back-to-school shopping fell short. Aside from autos, consumers were hesitant to loosen their purse strings, cutting back on non-essential, discretionary purchases. Consumption has been lackluster volleying at a near 2% rate through the first half of the year. With income growth of less than 1% and waning momentum in the jobs market, consumption is likely to falter further. And while the Fed isn’t necessarily watching the monthly retail sales data as a catalyst to policy change, a slowdown in spending is indicative of underlying weakness.
The PPI rose 0.3% in August, a tenth more than expected, thanks to stronger food and energy costs. The annual rate, however, continues to decline falling from 2.1% to 1.4%. On a three-month annualized basis, the headline PPI is up 4.4%.
The Core PPI was flat in August, a tenth lower than the expected 0.1% rise. Year-over-year, core producer prices are up 1.1%, down from a 1.2% pace the month prior. On a three-month annualized basis, core prices are up 0.9%.
Headline PPI with 6mo avg
Consumer goods prices rose 0.4% in August, thanks to a 2.6% increase in gasoline prices and a 0.2% increase in residential electricity costs. Residential gas prices, however, fell 1.7% in August. In total, energy prices rose 0.8% in August after a 0.2% decline last month. Year-over-year energy prices are up 0.7%.
Women’s apparel costs rose 0.4% in August, prescription costs increased 0.2% and both tobacco goods and civilian aircraft prices were unchanged.
Passenger car prices fell 0.5%, the second consecutive monthly decline, and capital equipment costs slipped 0.1% thanks to a 0.4% drop in computer prices and a 0.3% fall off in the light motor truck costs.
Bottom line: Producer prices continue to soften remaining well below the Fed’s target of 2%. On an annual basis producer prices have remained quite stable hovering around a 1.5% rate on average since late 2012. Slower global growth and uneven domestic demand continues to result in a diminished demand for raw materials, translating into subdued prices. From the Fed’s standpoint inflation fears are taking a back seat at this stage of the game.
Later this morning, UMich confidence is expected to remain virtually unchanged at 82.0 in the preliminary September reading and business inventories are expected to rise 0.2% in July.