- Retail sales increased healthily in February in line with expectations. Moreover,
- upward revisions to those in January and December strengthened the overall
- character of the report.
- Gasoline sales and autos increased the headline figure. In addition, retail sales
- increased satisfactorily.
- We remain positive on the outlook for US private consumption over the next six
- months, with risks biased to the upside. Details
US retail sales increased by a healthy 1.1% m/m in February consistent with our and consensus expectations. Higher pump prices boosted gasoline sales which were 3.3% higher m/m and auto sales which rose 1.6% m/m, still below the increase indicated by unit sales data. Sales in January were revised up to 0.6% m/m (previously: 0.4%) and in December to 0.3% (0.0%).
Gains were broad-based with positives including building materials (+1.4%) which in general have performed strongly over the past three months due to the mild winter weather, clothing (+1.8%), electronics (+1.0%), sporting goods (+1.0%), non-store retailers (+1.0%), and eating and drinking (+0.8%). Declines were reported in furniture (-1.2%) and general merchandise (-0.1%).
The "core" measure (ex gasoline, building materials and autos) rose 0.5% in February while core sales in January were revised up to 1.0% (previously: 0.7%) and in December to -0.2% (-0.7%). Consequently, the three month annualised core sales growth rate was 3.7%, still well below its usual level during a US recovery.
Following today’s data, we estimate that nominal personal spending increased 0.7% m/m in February and real personal spending 0.4%. Due to the upward revision to December and January data, private consumption growth is tracking 2.2% q/q AR in Q1. We forecast an increase to 2.7% in Q2.
Assessment and outlook
In our opinion, the balance of risks for private consumption is now biased to the upside. Although oil prices remain a major uncertainty and a potentially significant negative, other factors currently point upward. Firstly, the urgent need for households to repair their balance sheets decreased following the upward revision to both household income growth and the savings rate. Secondly, consumer credit growth has become positive once again and credit conditions have eased. Finally, the equity market rally and improved housing outlook will support household net wealth in 2012. If employment growth continues at its current rate the increase in household income should be sufficient to support average private consumption growth of around 2.5% for the remainder of the year.