U.S. Retail Sales Remain Little Changed

Overall retail sales including food services & drinking places in October edged 0.1% higher (1.8% y/y) following no change during the prior two months. September was revised from +0.1%. A 0.3% rise had been expected in the Action Economics Forecast Survey. Sales excluding autos improved 0.2% (3.2% y/y) after a 0.4% decline, revised from -0.3%. A 0.4% increase had been expected. During the last ten years, there has been a 92% correlation between the y/y change in retail sales and the change in real GDP.

Sales in the retail control group do not include autos, gasoline, building materials & food services. They align with the consumer spending estimates in the GDP accounts. Sales in this grouping rose 0.2% (3.2 % y/y) after a 0.1% September rise, revised from -0.1%. Gasoline service station sales fell 0.9% (-20.0% y/y), down for the fourth straight month.

Light motor vehicle & parts sales declined 0.5% (+6.0% y/y) after a 1.4% gain. The rise compared to a 0.4% increase in unit sales of cars and light trucks. Building materials & garden equipment sales gained 0.9% (2.7% y/y) following declines in three of the prior four months.

In other discretionary spending categories, general merchandise store sales fell 0.4% (+2.6% y/y) after a 0.5% gain. Electronics & appliance stores sales also fell 0.4% (-3.2% y/y) and reversed September's 0.4% rise. Clothing and accessory store sales eased slightly (+4.0% y/y) for the third straight month. To the upside, sporting goods, hobby shop, book & music store sales increased 0.4% (6.2% y/y) after a 1.3% jump and sales of furniture & home furnishings also increased 0.4% (5.3% y/y) after a 0.6% rise. Internet sales surged 1.4% (5.3% y/y) after a 0.3% gain. Restaurant sales rose 0.5% (7.0% y/y) following a 0.2% decline.

In the nondiscretionary spending categories, health & personal care store sales were firm and posted a 0.7% increase (3.9% y/y) following a 0.2% increase. Food & beverage store sales fell 0.3% (+2.2% y/y), down for the second straight month.

The retail sales figures are available in Haver's USECON database. The Action Economics figures are in the AS1REPNA database.

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The overall Final Demand Producer Price Index fell 0.5% in September (-1.1% y/y) following an unrevised zero change in August. It was the first decline since April. The Action Economics Forecast Survey expected a 0.2% decrease. Prices excluding food & energy also fell 0.3% (+0.8% y/y) and reversed a 0.3% increase. A 0.1% rise had been expected.

Final demand goods prices (35% of the total index) fell 1.2% (-5.1% y/y), down for the third straight month. The latest decline was led by a 5.9% drop (-23.7% y/y) in energy prices. Gasoline prices were off 16.6% (-42.8% y/) and home heating oil prices fell 6.5% (-44.1% y/y). Residential natural gas prices reversed most of the prior month's gain and declined 1.1% (-11.8% y/y) and residential electric power costs eased 0.1% (+1.0% y/y). Food prices declined 0.8% (-2.9% y/y), off for the second time in three months. Egg prices have been quite volatile and fell 18.2% m/m, but they have risen by roughly three quarters y/y. Beef & veal prices fell 7.9% (-3.3% y/y) while bakery product prices gained 0.1% (1.1% y/y). Fresh & dry vegetable costs rose 14.7% y/y, but dairy product costs were off 15.0% y/y.

Final demand goods prices excluding food & energy remained stable (0.2% y/y) after falling 0.2% in August. Core finished consumer goods rose 0.2% (2.6% y/y) after two months of remaining unchanged. Core consumer nondurables costs improved 0.2% (3.4% y/y), following two months of no change or slight decline, but consumer durables rose 0.3% (1.6% y/y). Private capital equipment costs improved 0.1% (1.3% y/y) while those for goods for government purchase declined 0.2% (-0.1% y/y). Prices of goods for export fell 0.5% (-3.6% y/y), down for the third straight month.

Final demand services costs (63% of the total index) declined 0.4% (+1.0% y/y) and reversed the August increase. This was led by trade services, which fell 0.4% (+2.1% y/y); trade services represent the margins charged by retail and wholesale dealers and merchants. Prices for transportation of passengers fell 1.8% (-6.6% y/y), repeating their August weakness. Prices for transportation and warehousing of goods in September also repeated the prior month's 0.3% decline (-2.4% y/y). Other services, including financial, health care and communications, among others, fell 0.3% (+1.0% y/y) after a 0.2% rise.

Final demand construction prices (2.0% of the index) remained unchanged (+1.8% y/y) after a 0.1% dip. Private capital investment costs were unchanged (1.8% y/y).

Prices of processed goods for intermediate demand fell 1.5% (-8.2% y/y), the largest of three consecutive declines.

The PPI data are contained in Haver's USECON database with further detail in PPI and PPIR. The expectations figures are available in the AS1REPNA database.

Total business inventories held steady during August (2.4% y/y) for a second month. Revisions to the July figures were minimal. These figures suggest inventories will have little effect on real GDP growth this quarter as in Q2.

Retail inventories increased 0.3% (4.5% y/y) in August, after a 0.7% jump. Motor vehicle & parts inventories advanced 0.2% (6.0% y/y). Outside of the vehicle sector, inventories gained 0.4% (3.7% y/y) paced by a 0.7% rise (6.4% y/y) in building materials. Elsewhere, increases were moderate. Furniture & home furnishings inventories gained 0.4% (-0.7% y/y) while clothing & accessory inventories also rose 0.4% (6.2% y/y). Inventories at food and beverage stores increased 0.3% (2.3% y/y) and general merchandise inventories rose 0.2% (2.8% y/y).

Merchant wholesalers inventories ticked 0.1% higher (4.1% y/y) in August, after a 0.3% decline while the value of factory sector stockpiles declined 0.3% (-0.4% y/y) for a second straight month.

August business sales declined 0.6% (-3.1% y/y) after a 0.1% uptick. The decline was paced by a 1.0% drop (-4.7% y/y) in wholesale sales followed by a 0.7% decline (-4.9% y/y) in factory sector shipments. Retail sales eased 0.1% (+0.8% y/y) following a 0.8% increase. Sales excluding motor vehicles fell 0.2% (-0.7% y/y) after a 0.6% rise.

The business sector inventory-to-sales ratio inched higher to 1.37, equaling its highest level since June 2009. The rise reflected increases in each business sector. The merchant wholesale I/S ratio rose to 1.31, its highest level since early 2009. Retailers' I/S ratio gained to 1.47, equaling its high for the economic recovery. In the manufacturing sector, the I/S ratio rose to 1.35. It has moved roughly sideways all year, staying near the recovery high.

The manufacturing and trade data are in Haver's USECON database.