- Retail purchases rose less than forecast as fuel receipts fell
- University of Michigan sentiment gauge at four-month high
What you need to know about Friday’s U.S. economic data:
RETAIL SALES (OCTOBER)
- Rose 0.1 percent, compared with 0.3 percent survey median, and September revised lower to unchanged
- Core sales, the categories used to calculate GDP, climbed 0.2 percent versus expectations for a 0.4 percent gain
- Reflecting falling prices, gasoline sales dropped for a fourth straight month
The Takeaway: Americans continue to pocket their savings at the gas pump, leading some economists to tweak their fourth-quarter GDP forecasts a bit lower. The fuel discount also showed up in other categories of consumer purchases, including general merchandise stores such as Costco Wholesale Corp. that also sell gas. Subdued October prices for food, reflected in Friday’s wholesale price report, further dragged on grocers’ receipts. While retail sales are a barometer of demand for merchandise, data releases later this month that include services will give a better picture of household purchases. Offsetting some of the worries about demand is a pickup in consumer sentiment, which is buoying the spending outlook heading into the critical holiday season.
MICHIGAN CONSUMER SENTIMENT INDEX (NOVEMBER PRELIMINARY)
- Rose to 93.1, exceeding the median estimate of 91.5
- Six-month expectations gauge highest since June, present conditions index strongest in three months
- Long-term inflation expectations -- five to 10 years -- held at 2.5 percent, matching lowest in data to 1979
The Takeaway: Consumers’ spirits climbed in November, lifted by cheap borrowing costs and price discounts that may help boost spending as the holiday-shopping season approaches. While low inflation may be complicating Federal Reserve plans to raise interest rates, it’s helping Americans stretch their paychecks further and resulted in the best real-income expectations since January 2007. Consumers also reported feeling cheerier about the job outlook, stock prices and the global economy this month, which could portend a step up in economic activity.
BUSINESS INVENTORIES (SEPTEMBER)
- Rose 0.3 percent, most in three months and exceeded median forecast of no change
- Retail inventories swelled 0.8 percent from a month earlier
- Total inventory/sales ratio climbed to 1.38 months, highest since June 2009
The Takeaway: The gain indicates stockpiles were less of a drag on third-quarter growth than the government’s first print. Economists at Barclays estimate the inventory correction shaved 0.7 percentage point off GDP during the period, half of the 1.4 points Commerce initially reported. While that’s favorable for the quarter gone by, it also indicates production will be slow to pick up. Retailers in particular have quite a bit of work to do in terms of ridding shelves and warehouses of unsold goods -- the I/S ratio reached 1.48 months, the highest since May 2009. Elevated retail inventory means Americans can probably expect better deals and discounts during the holidays.