In January, the portion of retail sales that feeds into consumption in GDP accounts had recovered sharply, alleviating worries regarding the slowdown in consumer demand in Q4. Even though retails sales data for February is not expected to match the strength seen in January, the report is likely to show persistent resilience in household sector, consistent with strong underlying fundamentals.
“We expect overall retail sales to be down 0.3% m/m in February, however the headline weakness is likely to mask underlying strength in consumer demand”, says Societe Generale.
Retail gasoline prices are expected to have dropped 8.9% m/m in February. Sales at gasoline stations, after adjusting for volume effects and seasonality, are likely to have declined 10%, subtracting 0.7% from total retail sales. Meanwhile, auto sales are likely to have grown moderately. Excluding auto sales, retail sales are expected to have declined even more by around 0.5%. However, excluding gasoline, the retail sales data should give a more optimistic picture.
“We project that sales excluding autos and gasoline will be reported up 0.5% mom, slightly exceeding the 0.4% posted in January. Finally, the retail control aggregate which strips out autos, gasoline, building materials and food establishments is likely to be up 0.2%”, says Societe Generale.
Meanwhile, in January, real personal consumption expenditure was at an annualized rate of 2.4%, more than the Q4 average. The projection of 1.8% growth for Q1 GDP assumes that the real consumption grows at 2.7% saar.
