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Economy in Brief

U.S. Retail Sales Surge
by Tom Moeller April 13, 2004

Retail sales surged 1.8% last month on the heels of a 1.0% jump in February. This surprising strength far exceeded Consensus expectations for a 0.7% March gain. Sales' gains in both February and January were revised up.

Retail sales excluding motor vehicles & parts dealers exploded with a 1.7% jump and February was revised to a 0.6% increase from the advance report of little change. Consensus expectations had been for a 0.6% increase in March.

A 10.6% m/m jump in sales for building materials, garden equipment & supply dealers (20.8% y/y) led the March sales strength and February as revised to +16.7% from the advance report of no change.

Clothing and accessory store sales also were strong and exploded 1.9% (9.6% y/y).Sales of furniture/home furnishings & electronics/appliances rose 0.7% (10.3% y/y) after an upwardly revised 0.4% February increase. Sales at general merchandise stores added another 0.3% (7.4% y/y) to the huge gains of the prior two months.

Motor vehicle dealers' sales rose a moderate 2.1% m/m as unit sales of light vehicles rose 1.9% to 16.68M. Sales at gasoline service stations rose 0.8% (3.9% y/y).

  Mar Feb Y/Y 2003 2002 2001
Retail Sales & Food Services 1.8% 1.0% 8.2% 5.4% 2.5% 3.1%
  Excluding Autos 1.7% 0.6% 8.5% 5.2% 3.2% 3.1%
Chain Store Sales Rose in Early April, But ...
by Tom Moeller April 13, 2004

Chain store sales rose 0.8% in the week just before Easter following a 0.3% gain the period earlier, according to the International Council of Shopping Centers (ICSC)-UBS survey.

The level of sales so far in April, however, is disappointing. Due to a sharp 1.9% drop in late March, April sales are down 0.5% from the March average.

The ICSC-UBS retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

During the last ten years there has been a 51% correlation between the year-to-year percent change in the ICSC-UBS measure of chain store sales and consumer sentiment.

ICSC-UBS (SA, 1977=100) 04/10/04 04/03/04 Y/Y 2003 2002 2001
Total Weekly Retail Chain Store Sales 436.1 432.5 6.9% 2.9% 3.6% 2.1%
Small Business Optimism Dipped
by Tom Moeller April 13, 2004

The Small Business Optimism Index published by the National Federation of Independent Business (NFIB) dipped 0.1% in March. The decline was the third in a row and pulled optimism 4.1% below December which was near the record high.

The m/m decline reflected another drop, to 22%, in the percent of firms expecting the economy to improve. Nevertheless, the percentage of firms expecting higher sales in six months rose to 29% and the percentage of firms planning to add to capital expenditures rose to 35%. The percentage planning to raise employment was stable at 13%, a figure much improved versus the lows of early last year.

During the last ten years there has been a 47% correlation between the level of the NFIB index and the y/y change in real GDP.

The percent of owners raising average selling prices rose to 19%, the highest level since June 2000.

About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.

Nat'l Federation of Independent Business Mar Feb Y/Y 2003 2002 2001
Small Business Optimism Index (1986=100) 102.5 102.6 8.2% 101.3 101.2 98.4
U.S. Business Inventories Up Again
by Tom Moeller April 13, 2004

Total business inventories rose 0.7% in February for the sixth consecutive monthly increase. Consensus expectations were for a 0.3% increase.

Inventory additions lead production gains. During the last ten years there has been a 46% correlation between the three month change in business inventories and the three month change in US factory production. That correlation rises to 66% when the production gain is lagged six months.

Retail inventories rose 0.4% in February. The gain was mostly due to a rise in auto inventories. Non-auto inventories ticked just 0.1% higher. Recently, inventory accumulation has been scattered across retail sectors but year-to-year furniture/home furnishings (+6.5%), building materials (+9.9%) and motor vehicles (+6.3%) have been strong.

Overall business sales surged 0.5% (7.8% y/y) in February following a 0.3% January increase.

The inventory-to-sales ratio was unchanged at a record low 1.33.

Business Inventories Feb Jan Y/Y 2003 2002 2001
Total 0.7% 0.2% 2.0% 1.9% 1.5% -4.5%
  Retail 0.4% -0.0% 3.7% 4.9% 6.0% -2.8%
    Retail excl. Autos 0.1% -0.1% 2.5% 3.0% 2.6% -1.1%
  Wholesale 1.2% 0.2% 1.2% 2.2% 0.4% -4.5%
  Manufacturing 0.5% 0.3% -0.8% -1.3% -1.8% -6.1%
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