October Retail Sales

Here at Atlas Indicators we have been eagerly awaiting the Commerce Department’s report on October’s retail sales.  Many of our other indicators have been showing a slow, persistent shift toward the positive, but consumption still remains the Holy Grail of economic recovery.  Unless folks are willing to lay out their hard-earned cash, there is no economy; that’s why consumption makes up the lion’s share, some 70%, of our GDP.  Overall, October retail sales blew past consensus estimates, recording a 1.4% gain.  Unfortunately, some of the shine from this report was removed as a .8% downward revision to September’s already negative number pulled it further into the red to post a total -2.3% decline.  While retail sales on an annualized basis are still negative, off 1.7%, this is a huge improvement from the 6.3% Y/Y shrinkage we saw in September.  When we look at “core” retail sales which subtract autos and gasoline, we see a .3% jump which matches September’s rise (after a negative .1% revision).  This points to where October’s strength lies since auto sales, up 7.4%, seem to have rebounded quickly from the drought seen in September (down 14.3%) as the government’s Cash for Clunkers incentive appears to have pulled some sales forward into August.  Gas prices remained basically unchanged.  The biggest weakness was still related to housing where declines were registered in areas such as building materials and home furnishings.  The surprising strength of this report is most welcome, but we will want to see an improving trend manifest over the holidays before feeling comfortable about moving our indicator for retail sales further into positive territory.