Retail Sales Continue To Surge

| About: Consumer Discretionary (XLY)

By Doug Short

The Census Bureau's Advance Retail Sales Report for October released on Tuesday showed continued growth improvement over the substantial September increase. Headline sales came in at 0.8% month over month to one decimal, and September number was revised upward from 0.6% to 1.0%. The headline number beat the Investing.com consensus of 0.6%. Core sales (ex Autos) came in at 0.8% MoM, which beat the Investing.com consensus of 0.5%, and the September Core was revised upward from 0.5% to 0.7%.

Here is the introduction from the report:

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for October, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $465.9 billion, an increase of 0.8 percent (±0.5%) from the previous month, and 4.3 percent (±0.9%) above October 2015. Total sales for the August 2016 through October 2016 period were up 3.3 percent (±0.7%) from the same period a year ago. The August 2016 to September 2016 percent change was revised from up 0.6 percent (±0.5%) to up 1.0 percent (±0.1%).

Retail trade sales were up 1.0 percent (±0.5%) from September 2016, and up 4.3 percent (±0.7%) from last year. Nonstore retailers were up 12.9 percent (±1.6%) from October 2015, while Miscellaneous stores retailers were up 9.5 percent (±4.2%) from last year. [view full report]

The chart below is a log-scale snapshot of retail sales since the early 1990s. The two exponential regressions through the data help us to evaluate the long-term trend of this key economic indicator.

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The year-over-year percent change provides another perspective on the historical trend. Here is the headline series.

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Core Sales

Here is the year-over-year version of Core Retail Sales.

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"Control" Purchases

The next two charts illustrate retail sales "Control" purchases, which is an even more "Core" view of retail sales. This series excludes Motor Vehicles & Parts, Gasoline, Building Materials as well as Food Services & Drinking Places. The popular financial press typically ignores this series, but it a more consistent and reliable reading of the economy.

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Here is the same series year over year. Note that the current level is fractionally below the highlighted values at the start of the two recessions since the inception of this series in the early 1990s.

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For a better sense of the reduced volatility of the "Control" series, here is a YoY overlay with the headline retail sales.

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Bottom Line: September sales showed a strong bounce after the August doldrums. Later this week, we'll take a close look at Real Retail Sales after the October Consumer Price Index is released.