Announced this morning, Retail Sales increased by 0.2% in September, less than expected and well below the previous month’s increase. The Control Group, which is a closer measure of the inputs for GDP that excludes sales for food, autos, building materials, and gas stations, decreased -0.1% in September, less than expected and a sizable decrease from the previous month’s revised figure. Meanwhile, the Producer Price Index increased 0.3% in September, as expected, and increased 2.7% on an annual basis. The core rate which excludes food and energy increased just 0.1% in September, less than expected, and increased 2.6% on an annual basis.
Reviewing the various retail sales categories, monthly sales for Gasoline Stations, up 2.0%, and Miscellaneous Store Retailers, up 2.9%, were relatively strong while monthly sales at Sporting Goods, Hobby, Musical Instrument, and Book stores, down -2.5%, Non-Store retailers, down -0.7%, and Clothing and Clothing Accessories stores, down -0.7%, were all relatively weak.
Overall, headline retail sales increased less than expected in back in September and well below the previous month’s increase. The control group came in with a slight decrease denoting GDP could move down slightly. Consumers were active at gasoline stations and miscellaneous stores but held back with purchases on hobbies, non-store retailers, and clothing. In addition, inflation increased at the headline producer or company level in September, but the core rate came in less than expected for the month. Still, the annual level for the core rate remains above the 2% Federal Reserve target for consumers, suggesting companies would need to squeeze their margins to bring consumer inflation lower to the target. How the Fed interprets the data and how consumers hold up in a mixed labor market will be key for the markets in the coming weeks.
In all, the 10-year US treasury yield ticks lower following the report and equity futures are mixed as we head into the market open. Have a safe and Happy Thanksgiving!
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