Two closely watched reports at 8:30 indicated that rising energy prices in June boosted retail sales above the average forecast, while gas prices pushed up cost pressures for producers.
Building on a half-percentage point gain in May, retail sales jumped 0.6% in June, boosted by a 5% surge in gasoline prices and a 2.3% gain in sales of motor vehicles & parts. The gain was one-tenth higher than forecasts. Since this time last year, however, sales have fallen 9%.
John Herrmann from Herrmann Forecasting calling the figures “much better than expected,” noting gains in motor vehicles sales, unit gasoline sales, and control retail sales (which mimic core consumer spending in the GDP report).
“The US economy is stabilizing (and that development is broadening-out), and we foresee numerous developments that point to a solid rebound in 2H-2009,” he said.
Less positive was the move in core sales ― all items minus autos ― which moved up only 0.3% on the month, well below expectations for a 0.6% advance. On the year, ex-auto sales are down 7.9%.
“Sales excluding gas and autos were down for the fourth consecutive month, falling by 0.2% M/M, which is a clear indication that while the headline number continues to show some promise, underlying expenditures continue to be weak,” said Millan Mulraine from TD Securities.
Overall, Mulraine called the report “decidedly mixed,” commenting that the better-than-anticipated headline masks a “weak underbelly of core consumer spending, which continues to decline.”
Looking ahead, he expects consumer spending to “remain soft” even when accounting for greater impact from the stimulus package.
Details:
- Furniture stores: -0.2%
- Electronic/appliance stores: +0.9%
- Building material & supplies dealers: -0.9%
- Motor vehicles & parts: +2.3%
- Food & beverage stores: +0.2%
- Health & Personal care stores: -0.3%
- Gasoline stations: +5.0%
- Clothing stores: 0.0%
- Sporting/Books/Hobby stores: +0.9%
- General merchandise: -0.4%
- Miscellaneous: -0.4%
Released at the same time, the Producer Price Index soared by 1.8% in June ― double the consensus forecast, and much higher than 0.2% gain in May or the 0.3% advance in April.
The Bureau of Labor Statistics called the acceleration in prices “broad based,” with energy prices leading the way with a 6.6% boost (following a 2.9% gain in May).
Still, even with that increase the year-to-year change is -4.6%.
Consumer foods increased 1.1% in the month, not quite rebounding from the 1.6% cut in prices in May.
Core PPI ― all-items minus volatile food and energy prices ― saw a 0.5% gain in the month, sending the annual rate to +3.3%.
“Energy prices were clearly the driver of higher prices across all levels of production in June,” said TD strategist Charmaine Buskas. “But the huge across the board gains in June PPI are likely to be at least partially reversed in July, as energy prices continue to unwind.”
Looking ahead to tomorrow’s Consumer Price Index, Buskas said forecasts should now carry an upside risk.
As of Tuesday, the median forecast for CPI is +0.7% (core = +0.1%).