Courtesy of Mish.
An interesting divergence in auto production and sales came out in separate reports today. Let’s start with sales.
Retail Sales Rise Thanks to Autos
The Bloomberg Economic Consensus for Retail Sales was for 0.3% growth. Actual growth came it at 0.2%, nonetheless Bloomberg issued a glowing report, largely on autos, but also because of small upward revision for last month.
For a second report in a row, upward revisions highlight solid growth in retail sales. Retail sales rose 0.2 percent in August with ex-auto at plus 0.1 percent and ex-auto ex-gas at plus 0.3 percent. These are all 1 tenth below consensus. July, however, shows broad upward revisions with total sales at a very strong plus 0.7 percent vs an initial plus 0.6 percent. Ex-auto for July is revised upward by 2 tenths to plus 0.6 percent and ex-auto ex-gas revised upward by 3 tenths to plus 0.7 percent.
Turning first to strength in the August data, motor vehicles rose 0.7 percent on top of July’s 1.4 percent gain. These are very solid readings for a very important component that points squarely at a healthy and confident consumer. Restaurants, another component tied to discretionary health, rose a very strong 0.7 percent to extend a run of gains. On the weak side are gasoline stations where, due to lower gas prices, sales fell 1.8 percent. But this decline actually underscores one of the reasons behind the consumer’s health unlike, however, declines in building materials, down 1.8 percent, and furniture, down 0.9 percent. Yet both of these declines follow very strong gains in the prior month.
Taken together, July and August point to a very strong start to the third quarter for the consumer, a fact that plays into the hands of the hawks at this week’s FOMC. Still, the doves can argue that slowing in August could point to negative effects from China-based volatility.
Recent History Of This Indicator
Retail sales are expected to rise 0.3 percent in August, a moderate gain that would not change the fate of the week’s FOMC meeting. But the range of forecasts is wide and a print near the top forecast of 1.0 percent could very well lift the chances of a rate hike. And strength in the month is seen in core sales reflected in the ex-auto ex-gas reading which is expected to rise a solid 0.4 percent. Gasoline stations are expected to post sharply lower sales in line with the month’s fall in gasoline prices.
Industrial Production Sinks Thanks to Autos
The Bloomberg Consensus Estimate for Industrial Production was -0.2%, in a range of -0.7% to +0.5%. The actual number was -0.4%, with an interesting highlight.
A reversal in the auto sector pulled down industrial production in August, falling 0.4 percent vs the Econoday consensus for a 0.2 percent decline. The manufacturing component fell 0.5 percent, also deeper than the consensus at minus 0.3 percent. In an offset, gains in July proved more robust than initially reported with total industrial production revised 3 tenths higher to plus 0.9 percent and manufacturing revised 1 tenth higher, now also at plus 0.9 percent.
Motor vehicle production is August’s disappointment, down 6.4 percent following July’s giant 10.6 percent spike. When excluding motor vehicle production, however, industrial production was unchanged in August following respectable gains of 0.3 percent in the prior two months. But these readings are far from spectacular and the weakness in the latest month could be a signal of retrenchment tied to Chinese-based volatility.
Turning to the report’s other two components, utility production rose 0.6 percent in August with mining at minus 0.6 percent. Mining, hit by weak commodity prices, has been hurting all year with the year-on-year reading at minus 3.2 percent. Utilities, however, are up 3.2 percent year-on-year which leads the major components as manufacturing’s year-on-year rate is a soft looking plus 1.4 percent. Total industrial production is up only 0.9 percent year-on-year.
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