The monthly retail sales report will be coming out tomorrow. The retail sales report will indicate the level of spending by US consumers at retail outlets during the first month of the year. The overall consensus for January is somewhat conservative.
The data, which will be released by the US Department of Commerce, is forecast to show that excluding autos, retail sales will rise at a slower pace of 0.4%. This marks a slower pace of increase comparing to the 0.7% increase earlier.
The retail sales control group in January is expected to rise 0.4%, down from 0.5% previously. The headline retail sales for January is tipped to rise 0.3%, marking the same pace of increase as the month before.
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Other measures of consumer data for January points to a strong month. Both the Conference Board and the University of Michigan’s report on consumer sentiment were higher. It could translate to a possible increase in retail spending during the month.
The consumer confidence report underlines the easing of trade tensions between the United States and China. Both economies agreed to a Phase one trade deal with China promising to increase its imports from the United States. The trade tension was a major concern. Recent economic data shows a modest pick-up in activity in the manufacturing sector.
After five months of contraction, the US manufacturing sector rebounded, rising above the 50-level of the index, suggesting expansion. Based on the broader improvement across various measures of the economy, it is possible that the retail sales report could come out slightly better, comparing to the previous month.
Modest Pick-Up in Auto Sales in January
Auto sales in the United States contracted at a modest pace of 0.2% on a year over year basis, non-seasonally adjusted. On a seasonally adjusted basis, auto sales rose 0.9% on the month with an annualized rate of 16.85 million units.
Despite the monthly pickup, the data shows that the underlying trend has been one that is declining since the fourth quarter of 2019. One of the reasons behind this is due to the General Motor’s workers strike.
This brought about considerable volatility in the monthly sales data. The sales from General Motors accounts for nearly 20% of the sales in January. The company alone recorded a 13.8% increase on the year after falling 14% on the year in October during the strike period.
With the modest pick up in auto sales for January, it is quite likely that we could see a pickup in the retail sales activity for the month. However, the pace of increase could be sluggish.
In December 2019, the retail sales data rose for the third consecutive month. This came despite a cut back in motor vehicle sales. The overall data underlined the view that the US economy was maintaining a moderate pace of growth into the close of the year.
Now, with the uptick in the auto sales report, we could expect to see a slightly higher print than forecast. There is also the possibility that there could be an upside revision to the figures for December 2019.
Impact of the US Retail Sales Report
The impact from today’s retail sales report will be small comparing to other big-ticket items. The US economy has been on an upward swing over the past few reports. The outcome of the retail sales will of course be felt on the Q1 2020 GDP data.
As of last week, the forward-looking indicators point to a 2.9% increase in growth in the first quarter period to date. Thus, a strong retail sales data will certainly keep this growth rate steady.