U.S. Retail Sales Above Expectations: Auto Sales & Gas Prices Rose

U.S. retail sales rose 0.3% during January following an unrevised 0.4% decline during December. The gain beat expectations for a 0.2% decline.

Motor vehicle & parts purchases rose 0.6% (-0.2% y/y). The rise contrasted with an earlier report of a 6.3% m/m decline in unit sales of light vehicles during January.

Excluding autos, retail sales last month barely exceeded expectations and rose 0.3%. That made up a little revised 0.3% December drop. November sales were revised down slightly.

Higher gasoline prices provided lift to retail sales with a 2.0% (23.0% y/y) gain. That, in part, reflected a 0.8% m/m rise in gas prices. Less gasoline & autos, retail sales were unchanged and prior months' results were taken down.

Last month, sales of building materials fell 1.7% (-4.8% y/y). Taking out these very volatile components of retail spending to perhaps gain a better sense of underlying consumer spending growth, retail sales less autos, gasoline and building materials rose 0.2% last month (3.5% y/y).

Food & beverage store sales also provided lift to January sales with a 0.6% (5.7% y/y) rise. Restaurant & drinking place sales fell 0.5% (+4.4% y/y).

Sales of discretionary items generally were soft last month. Apparel store sales did rise 1.4% but that failed to fully make up a 2.3% December decline. Clothing store sales last month were 0.1% below the January level in 2007. Furniture, home furnishings & appliance store sales fell 0.7% (-3.0% y/y) for the third decline in the last four months. Sales of electronics & appliances dropped 1.0% after a 3.2% December slide. Sales at general merchandise stores rose 0.1% (2.4% y/y) after December's gain of 0.2%.

Sales of nonstore retailers (internet & catalogue) rose 0.5% (10.6% y/y).

Housing, Credit and Consumer Expenditure from the Federal Reserve Bank of Kansas City can be found here.

All EMU industrial sectors are seeing a considerable decline in their rates of growth for industrial output. Capital goods has been a strong sector in Europe and we have seen orders for capital goods holding up especially in Germany. But on an EMU-wide basis capital goods output is now declining over three months and its growth rate year over year is declining as well. Consumer goods output has never really been strong in this recovery and now it is showing signs of decay from a low growth level. For the quarter industrial output is off by about one percentage point.

Among countries Germany is the strongest but even its growth rates show a deceleration in IP. France (excluding construction) is holding up a bit better than Germany, but with a weaker Yr/Yr rate of growth. Italy’s output shows a deep year/year decline for output. Spain shows a shallow Yr/Yr decline. The UK has been pretty flat for most of the past year.

For Q4 2007 Germany has the strongest contribution from IP at 3.4% Spain is next at 2.9% France is third at 1.1%. Italy has a strongly negative -10.4% IP contraction in Q4. The UK has a small 0.5% subtraction as IP sides in the fourth quarter.

Despite some stirring the Zew Survey for Germany we also saw that the Zew current conditions assessment is sliding. A pick up in sentiment for the future hangs on some rate cuts by the Fed, the potential for more and a US stimulus package that has just been passed into law. But the future remains cloudy and current conditions are still very weak, and in some cases, getting weaker.

Japan’s consumer confidence survey did not used to be monthly. That is why the chart shows its past as a quarterly report represented by unconnected dots co-joined with its new form in which the dots are connected month-to-month. Based on a full sample of observations back to 1988 the current Consumer confidence readings are very weak. Based on the data from 2004 onward when monthly reporting kicked in these are the worst levels for all of the components that this report has seen. But in its broader historic context, while overall livelihood is nearly at an all-time low, employment is still above mid range in its 54th percentile. Willingness to buy durable goods is weak in the bottom 25 percentile of its range. The same relative position is true of expected income growth. People assess the value of their assets as in about the bottom third of its historic range.

Clearly Japan is undergoing some difficulties. The consumer is still very concerned about the future. While the OECD leading indicators show Japan in an upswing of sorts, Japan’s own indicators continue to show the economy bogged down with some conditions still worsening.