Main takeaways

  • February retail sales weaker than consensus; cumulative sales in Dec/Jan revised lower.
  • Most sell-side analysts revised their consumption estimates down, taking a couple of tenths out of expected GDP growth for 1Q 16 (currently in the 1.4% to 2.5% range).
  • Softer retail sales can be attributed to tighter financial conditions and some setback in consumer confidence…
  • …but, in my view, the bulk of the current slowdown continues to be driven by gasoline sales (retail gas prices dropped 10% in February).

Analysis

US retail sales was weaker than market consensus in February, and the previous two months were revised lower. The chart below shows that overall retail sales have been flat since July/2005.

Retail sales excluding gas

Part of the slowdown in retail can be attributed to the tightening of financial conditions, but the drop in gasoline prices seems also to be behind the weakness in retail. Gasoline retail prices dropped a cumulative 40% since last July and the chart below highlights that drop in nominal gasoline sales explain an important part of total retail slowdown.