- Advance Retail Sales for September fell .4% versus estimates of a .2% increase and a .1% gain in August.
- Retail Sales Less Autos for September fell .5% versus estimates of a 0.0% gain and a .2% increase in August.
- Preliminary Univ. of Mich. Consumer Confidence for October rose to 92.3 versus estimates of 86.5 and a reading of 85.4 in September.
- Business Inventories for August rose .6% versus estimates of a .5% gain and a .7% increase in July.
BOTTOM LINE: Prices of goods imported into the US fell in September, led by the biggest drop in oil prices since December 2004, Bloomberg reported. A 10.3% drop in the cost of petroleum imports resulted in the index declining by the most since April 2003, easing cost pressures on companies and consumers. Import prices were 2.0% higher in September from year ago levels versus a 6.3% rise in August. Prices of products imported from China fell .2% versus a .1% gain in August. I continue to believe most measures of inflation have peaked for this cycle as the mania for commodities continues to unwind, unit labor costs remain subdued and global growth decelerates to around average levels.
The biggest decline in gasoline service station receipts ever recorded led to an unexpected drop in retail sales last month that masked spending gains elsewhere, Bloomberg said. Sales increased .6% excluding service station receipts, boosted by gains in clothing, building materials and furniture. Sales excluding autos, gasoline and building materials, which the government uses to measure GDP figures for consumer spending, rose .8% last month, the most since January. Gasoline prices have declined about 19% since the end of August. Sales at non-store retailers, which include online and catalog sales, surged 1.1% in September, while sales at department stores rose 1.0%. The International Council of Shopping Centers is projecting a 3% same-store-sales gain for the November-December holiday shopping season. I continue to believe retail sales will, exceed those estimates as stocks rise, energy prices fall, inflation decelerates, interest rates remain low, housing stabilizes, the job market remains healthy and optimism increases.
Consumer confidence in the US jumped more than expected, to the highest since July 2005, this month as gasoline prices plunged and stocks rose, suggesting spending may gain momentum heading into the holiday shopping season, Bloomberg said. The expectations component of the index rose to 83.4 from 78.2 in September. The current conditions component of the index, which gauges Americans’ perceptions of their financial situation and whether it’s a good time to buy big-ticket items, soared to 106.1 from 96.6 the prior month. Consumers said they expect inflation to rise 2.9% over the next year versus expectations of a 3.1% increase in the prior report. The S&P 500 has risen 12% since June lows. As well, income growth, which is twice most measures of inflation, is helping boost sentiment. I expect consumer sentiment to continue improving into year-end as stocks rise, the job market remains healthy, housing stabilizes, inflation decelerates, interest rates remain low, energy prices fall further and irrational pessimism lifts further.
US business inventories rose in August as companies sought to keep enough goods on hand to meet demand, Bloomberg said. Sales rose .8% versus a .5% gain in July. The inventory-to-sales ratio remained near an all-time low of 1.26 months. I continue to expect inventory rebuilding to begin adding to economic growth early next year as auto production cutbacks subside and companies gain confidence in the sustainability of the current expansion.
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