November Retail Sales, Industrial Production and Producer Prices

 Holiday Sales, Ho Ho No?

  • November Retail Sales increased by just 0.1 percent.
  • Industrial Production fell by 0.4 percent in November as utility output dropped.
  • The Producer Price Index for Final Demand increased by 0.4 percent in November.
  • The Federal Reserve is widely expected to raise the fed funds rate range today, for the first time in a year.

Retail sales were weaker than expected in November, increasing by just 0.1 percent. The monthly retail sales survey includes e-commerce. The soggy November numbers call into question our expectation for a good holiday shopping season. It looks like everything is lining up in support of consumers warming up the plastic this season. Job growth has been good, wages are increasing, stock prices are buoyant, home prices are up, consumer confidence is rising, yet retail sales in November barely budged. Over the past 12 months, total retail sales are up a moderate 3.8 percent. Non-store retailers as a group are doing better, with sales up 11.9 percent over the year. In November, the monthly totals were held down by motor vehicle and parts sales, which declined by 0.5 percent, consistent with the dip in unit auto sales from an 18.0 million unit pace in October, to 17.9 million in November. Retail sales excluding autos increased by 0.2 percent in November. Most categories reported decent gains. However, clothing store sales were unchanged, possibly due to the warm November weather. Sporting goods sales fell by 1.0 percent for the month, probably not just due to the late start to the pond hockey season. General merchandise stores gained a sedate 0.1 percent for the month.

Warmer-than-normal weather also showed up in the industrial production data for November. Total IP fell by 0.4 percent, dragged down by utility output, which declined by a hefty 4.4 percent with the warm weather. Output for mining industries increased by 1.1 percent in November, as the drilling rig count continued to improve. Output for manufacturing industries dipped by 0.1 percent as auto assemblies declined from a 12.33 million unit pace in October, to 11.91 million in November. Overall industrial production has flattened out in the U.S. over the last year, held in check by stabilizing auto sales and declining oil field activity. We expect IP to stay flattish over the next year as auto sales gradually ease and drilling activity slowly increases.

Producer prices increased by more than expected in November. The PPI for final demand gained 0.4 percent, boosted by trade services, which was driven by higher margins at wholesalers and retailers. Food prices were up by 0.6 percent as beef and fresh fruit prices climbed. Over the last 12 months, the PPI for final demand is up by 1.3 percent. We expect that year-over-year comparison to continue to increase through early next year.

This afternoon we expect the Federal Reserve to announce a 25 basis point increase in the fed funds rate range. This should come as no surprise to anyone on the planet. We will be looking for any changes to forward guidance from the Fed and for any shifts in their expectations for next year.

Market Reaction: Equity markets dipped on the softer retail sales report. The 10-year Treasury yield is down to 2.43 percent. NYMEX crude oil is down to $52.14/barrel. Natural gas futures are up to $3.50/mmbtu.

retailsales-12-14-16

For a PDF version of this Comerica Economic Alert click here: retail-sales-12-14-16.

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