US Retail Sales: Despite headline, number still on track for a sharp increase in holiday sales – Wells Fargo

Data released on Tuesday showed an increase of 0.3% in October, below the 0.5% of market consensus; September numbers were revised lower. Analysts at Wells Fargo, point out that despite the miss on the headline retail sales figure, they see numbers largely on track with their forecast for a 9.0% year-over-year increase in holiday sales. 

Key Quotes: 

“Retail sales increased only 0.3% in October, which was below the 0.5% expected by the consensus, and making things worse is the fact that September’s 1.9% increase was dialed back to an increase of just 1.6% after revisions. Every cut of the October numbers disappointed. Ex-autos, for example was up just 0.2% instead of the 0.6% expectation and control group sales, which offers a good read on personal consumption figures in the GDP report—edged higher by 0.1% versus the 0.5% expectations.”

“Despite the lousy outturn in October, our grouping of store types that comprise overall holiday sales is actually higher than what we had been forecasting for October in our Holiday Sales report. This is largely attributable to revisions to prior months most notably August which was revised from an outright decline to a 1.1% monthly increase. It also suggests scope for some upside revision to Q3 PCE which was already up more than 40% at an annualized rate.”

“Despite the miss on the headline retail sales figure, we largely are on track with our forecast for a 9.0% year-over-year increase in holiday sales. Not only did the October increase exceed the only modest increase we were expecting, but upward revisions put us more ahead of the game through October. Holiday Sales are already 10.8% above where they stood in December of last year. Even if we are down slightly in the final months of the year, we are still on track for a banner year for holiday sales, on a year-over-year basis.”