Total retail sales rose by 0.6% in June up slightly from the 0.5% rise in May, however are 9.0% below a year ago. These are nominal numbers, so in real terms, sales are even weaker than the report indicates.
However, given the low inflation numbers lately (well, the PPI wasn’t so great in June, but that was mostly a function of oil prices) as the graph below (from http://www.calculatedriskblog.com/) shows the difference between real an nominal is much less than it used to be.
It also means that nominal sales are off by an unprecedented amount. The June number was slightly stronger than the 0.4% rise expected by the consensus of economic forecasters.
However, as one digs deeper into the numbers, the report was not as positive as the headline suggests. Almost all of the improvement came from autos and gasoline. Sales of autos and parts rose by 2.3% on the month as dealership sales started to rebound from very depressed levels. Still, on a year-over-year basis, auto sales are down 14.1%.
If auto sales are stripped out, sales rose just 0.3% in June — a slower pace than May’s 0.4% rise and below the consensus expectations for a 0.5% increase. The other big factor was sales at gasoline stations, which rose by 5.0% for the month, but are down 31.6% for the year. Clearly what is going on has much more to do with the price per gallon than the number of gallons sold. The increase in gas station sales matched the 5.0% rise in May.
Recently however, gasoline prices have started to back off again, so I would not expect such a big gain in July. Gasoline prices are for the most part a function of crude oil prices, so do not read the increasing sales there as a good thing for the independent refining companies like Valero (VLO). Analysts have been hacking away at their forecasts for those firms recently.
The overall tone of the report showed continued pressure on discretionary spending. Building Material store sales — think Home Depot (HD) and Lowe’s (LOW) — fell 0.9% on the month, more than reversing a 0.4% gain in May. On a year over year basis they are down 13.0%.
General Merchandise sales were down 0.4%, matching the 0.4% decline of May. On a year over year basis, general merchandise sales are only down 3.0%. However, general merchandise includes both the discounters and the department stores. Department stores like J.C. Penney’s (JCP) and Macy’s (M) saw a 1.3% decline for the month following a 1.1% decline in May, to bring the year-over-year decline to 9.4%.
However, those firms seem to have done a very good job of cost-cutting and analysts have been generally raising their earnings estimates for them (perhaps they went overboard with cuts earlier this year). Furniture store sales fell 0.2%, an improvement over the 0.5% decline in May, and down 12.6% on a year over year basis. I would read that as a slight positive. Yes it is still down, but that is a substantial slowing in the rate of decline for one of the most discretionary categories of retail sales.
The least discretionary category, Grocery Stores, have seen their sales hold up well, with a 0.2% increase in June following a 0.3% gain in May. On a year-over-year basis they are off just 0.7%.
Read the full analyst report on “VLO”
Read the full analyst report on “HD”
Read the full analyst report on “LOW”
Read the full analyst report on “JCP”
Read the full analyst report on “M”
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