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Retail sales miss during October

Published on November 15, 2024

Gerard MacDonell

This morning’s retail trade report for October was slightly weaker than expected, despite the beat on the headline series. The headline series includes auto sales, which are poorly measured within the report.

Retail sales have recently been subject to revision and switching seasonals. That does not overturn the notion that this report was weaker than expected. It clearly was. But as with last month’s employment report, it reduces the significance of the signal. I have not looked into whether there were special factors related to the weather etc.

Control retail sales fell 13 basis points and therefore missed by 43 basis points. And the level of control retail sales was revised down 47 basis points in August, although it recovered that ground in September.

Source: Bloomberg, FH calculations

Data are actual to October as shown in blue. Consensus and pre-revision data are shown in black.

Along with the moderately strong auto SAAR, data on restaurant sales, and (most importantly) a simple extrapolation of the recent 2% (ar) growth in services spending (for which there are no hard indicators ahead of the broader personal consumption report), it looks like overall real PCE growth is tracking at about +15 bps sequentially or +10 bps excluding autos in October. (These estimates move on retail sales, but the beta is about 1:3).

This leaves the Q4 real PCE tracking at about 2 ½ — 3%, largely because of a favorable launch effect. Underlying real PCE growth, as eyeballed in the right panel of the chart below, and less subject to arbitrary base effects, is similarly tracking firmly, despite the soft October.

Separately, the downward revision of retail control in August means that real PCE growth for the third quarter seems likely to get revised down 20 bps to 3.5%.

Source: BEA, NBER, FH calculations and estimates

Data are actual to September, inclusive of likely revision, and estimated to October.

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