February Retail Sales, January Inventories, March UI Claims

Sales Disappoint Again, Weather Blamed, Gasoline Prices Up

  • February Retail Sales fell by 0.6 percent; down for the third consecutive month.
  • Ex-auto Retail Sales decreased by 0.1 percent even as gasoline sales increased.
  • Business Inventories for January were unchanged for the second month in a row.
  • Initial Claims for Unemployment Insurance fell by 36,000 to hit 289,000 for the week ending March 7.

U.S. nominal retail sales fell again in February, for the third consecutive month. Sales fell by 0.6 percent in February, after dipping by 0.8 percent in January and by 0.9 percent in December. December and January retail sales were dragged down by falling gasoline prices and by falling auto sales. However, in February gasoline prices firmed and service station sales increased by 1.5 percent. Unit auto sales dipped again in February to a 16.2 million unit rate as temperatures plummeted across the Midwest and Northeast. Retail sales of motor vehicles and parts fell by 2.5 percent for the month. We can expect that some pent-up demand will get spent out in March and April, but it looks like consumer discretionary spending in 2015Q1 is going to be weak.  That is not to say that total consumer spending will be weak in Q1. The cold weather implies a jump in home heating bills and that will show up in the housing and utilities component of consumer services spending in the Q1 GDP accounting. Also, consumers are spending more money on healthcare with the roll out of the Affordable Care Act. The healthcare component of consumer services spending has increased at a 4-5 percent annualized rate for the last three quarters. That may mean that there is less money in household budgets for discretionary spending.

Business inventories were unchanged in January, following another unch in December. Meanwhile, total business sales decreased in those two months, meaning that the overall inventory-to-sales ratio has been climbing. While some of the movement in inventories and sales may be due to price effects of crude oil and petroleum products, this trend bears watching to see if it eventually invites production cuts to realign inventories.

Initial claims for unemployment insurance decreased by 36,000 to 289,000 for the week ending March 7. The series looks like it is trending right at 300,000 for the past three months, and that is a very good number. Continuing claims dropped by 5,000 for the week ending February 28, to 2,418,000. We are starting to see some evidence of the impact of lower oil prices on oil producing regions in the U.S. North Dakota has seen a jump in monthly unemployment insurance claims from November through January, compared with the very low levels they experienced last summer.

Market Reaction: Equity markets opened with gains. The 10-year Treasury yield is down to 2.08 percent. NYMEX crude oil is down to $47.83/barrel. Natural gas futures are down to $2.84/mmbtu.

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For a PDF version of this Comerica Economic Alert click here: Retail Sales 03-12-15.

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