- Retail sales in September 2013 unexpectedly fell 0.1% in the month partially retracing the 0.2% increase in August.
- The decline in activity largely reflected motor vehicle sales dropping 2.2% in the month.
- Sales at gasoline stations provided no offset by remaining unchanged in the month despite indications of rising gasoline prices.
- Control retail sales, which exclude sales at auto dealerships, gasoline stations, and building material stores (where sales increased 0.1% in the month), rose a stronger than expected 0.5% following a 0.2% increase in August.
Retail sales in September 2013 were slightly weaker than expected by dropping 0.1% in the month, which compared to expectations of unchanged activity. The decline follows increases of 0.2% and 0.4% in August and July, respectively.
Expectations going into the report for relatively flat activity in the month had been based on indications of declining auto sales. Such was confirmed in today’s report with motor vehicle sales dropping 2.2% in the month. Some offset was expected from gasoline station receipts on indications of rising gasoline prices although such did not materialize with activity in this component remaining unchanged in the month. There was also not as large a bounce in sales at building material stores, which were up only 0.1% although the decline in August was lessened to 0.3% from a previously reported 0.9%.
More encouragingly the so called ‘control’ measure, which excludes sales at motor vehicle dealerships, gasoline stations, and building material stores, and which feeds directly into the gross domestic product (GDP) add up, rose a stronger than expected 0.5% in the month following a 0.2% increase in August. The increase was abetted by a strong 0.7% gain in the electronic and appliance component that was helped by the launch of new product lines.
Although the September overall change in nominal retail sales was weaker than expected, this largely resulted from rising gasoline prices providing no evident support. More encouragingly, control sales rose a solid and stronger than expected 0.5%. This increase is supportive of the volume of consumer spending rising an annualized 1.9% in the third quarter of 2013, which would be little changed from the 1.8% increase in the second quarter. This is expected to be a key factor contributing to overall third-quarter 2013 GDP rising 2.2%, which would be down only modestly from the 2.5% increase recorded in the second quarter. Looking ahead to the fourth quarter, the recent government shutdown and continued uncertainty about US fiscal policy are expected to keep growth little changed to the end of the year. These recent developments weigh in favour of the Fed leaving the pace of asset purchases unchanged coming out of Wednesday’s FOMC meeting despite a reportedly tight vote to maintain such at the September policy meeting.
In a separate report, producer prices for September were also weaker than expected dropping 0.1% in the month, which compared to expectations of a 0.2% rise. The main downward surprise was consumer food prices dropping 1.0% in the month. As well, although the decline in gasoline prices was a relatively modest 0.1%, expectations had been for a percentage point increase. The 0.1% increase in core prices was in line with expectations
RBC