Goldman On Retail Sales: "Disappointing"

Somehow, with Amazon trading at all time highs, June retail sales, once again, came in "disappointing"... not our word. Goldman's. And that's even with nobody paying their i) mortgage, ii) property/school taxes, iii) lawn care, iv) federal income tax, v) food (thank you record food stamp usage), and, of course, vi) healthcare. Another battle lost by the permabulls (ot is that permacow in Joseph Cohen's case?). But no, the GDP hockeystick is coming. Just you wait! No really, you will have to wait...a long, long time.


1. Taken as a whole, the June retail sales report was somewhat disappointing, despite a headline gain that was better than expected. Overall sales were up 0.1% vs expectations of a decline; the main surprise here was that the Census recorded an increase in vehicle sales (+0.8%) despite a lower monthly vehicle SAAR; this could have occurred because the mix of sales to consumers and sales to businesses changed. But our retail "control" measure-sales excluding vehicles, gasoline, and building materials, which we use for tracking the likely pace of consumer spending within the quarter-was up a mere 0.1% on the month, well shy of our expectations. Coupled with modest downward revisions to prior data, this suggests further downside risk to our 2% real GDP growth estimate for Q2.

2. Initial jobless claims unexpectedly fell to 405k in the week ending July 9. We had anticipated that the government shutdown in Minnesota would add significantly to weekly claims, and that this could have been partly offset by seasonal distortions related to auto plant retooling. It is difficult to say whether the effect of the Minnesota shutdown was smaller, the effect of auto sector seasonality was larger, or the underlying trend in claims improved. On net the report should probably be interpreted as a modest positive, but we will need to see 1-2 more weeks of data before we can say that the trend has improved.

3. Finally, headline producer prices fell by 0.4% in June, two tenths more than expected. The decline was driven by lower energy prices (-2.8%) while food prices rose modestly (+0.6%). Core finished producer prices rose a bit more than expected, up 0.3% on the month. At the intermediate stage of processing, the core index rose 0.3%, down from a 0.9% increase in May.