Sales So-So, Prices Pick Up, Inventories Increase, On Track for Modest Growth
- Retail Sales for January increased by 0.4 percent. Ex-auto Retail Sales increased by 0.7 percent.
- Retail Sales of motor vehicles and parts dropped by 1.1 percent, even as reported unit sales increased.
- Import Prices gained 0.3 percent in January, with gains in both fuel and nonfuel prices.
- Business Inventories were up 0.4 percent in December; the inventory/sales ratio ticked down to 1.26.
Total retail sales for January increased by 0.4 percent, a little less than expected, with a drag from auto sales. Motor vehicle and parts sales for the month fell by 1.1 percent, even as unit auto sales increased to a 14.1 million unit pace. The January gains in unit auto sales were focused in fleet sales and so did not register in the retail sales report. Ex-auto retail sales increased by a solid 0.7 percent. General merchandise stores saw a robust 2.0 percent sales gain for the month. Higher prices at the pump drove gasoline station sales up by 1.4 percent. Grocery store sales gained 1.3 percent. The more discretionary sales categories showed weak results. Furniture sales declined by 0.2 percent. Clothing and accessory store sales were unchanged. With this read on January retail sales it looks like real consumer spending is on pace to increase in the neighborhood of two percent for 2012Q1. However, there is upside potential. Another two months of solid jobs and income growth could boost sales late in the quarter. Still, consumers are in no position to drive the economy through the first half of 2012. The spark needs to come from business investment. Lukewarm consumer spending, in the presence of fiscal drag, a deteriorating trade balance and subdued inventory accumulation results in only-modest real GDP growth of about 2 percent for 2012H1.
Import prices for January were up 0.3 percent, the second biggest increased in the last nine months. Fuel import prices gained 1.0 percent while nonfuel import prices were flattish at +0.1 percent. We expect to see an uptick in producer and consumer energy prices for January. Export prices gained 0.2 percent for the month. On a year-over-year basis export prices are up 2.5 percent, but the trend is cycling down, indicative of cooler global demand for some goods. December inventory data showed strong gains from merchant wholesalers while manufacturers and retailers posted small increases.
Market Reaction: Equity markets opened with losses. Treasury yields are down at the long end. Oil is up to $101.31/barrel. The dollar is up against the yen and the euro.