US: Retail Sales Strengthen, But Car Sales Disappoint

• US retail sales showed a healthy gain, despite the reading being below both our and consensus expectations. The weakness in headline numbers was primarily driven by disappointing car sales. Downward revisions added to the negative surprise.
• With decent sales growth in January, US personal consumption is now tracking around 2.5% q/q AR.
• US GDP growth is on track for around 2.5% growth in Q1 and we expect this trend to continue throughout the year. The Fed is likely to stay on hold for some time.

Details

US headline retail sales rose 0.4% m/m (consensus: 0.8% m/m) in January and December sales were revised down to 0.0% m/m from 0.1%. The increase was partly driven by a rise in chain store sales, as American consumers took advantage of the post-holiday price cuts. At the same time, there was a 1.3% increase in sales from gasoline stations. The release disappointed the market due to a surprising drop in car sales of 1.3%, while we expected to see a healthy gain.

As a result, core sales (excluding autos and gas) were in line with our forecast, showing the largest gain in three months, rising 0.6% m/m and beating consensus’ expectation of 0.5%. This was a nice surprise following last month’s weak figures, which saw a further downward revision to -0.2%. In particular, the food and beverages component was strong in January rising 1.3% m/m as well as general merchandise being up 2.0% m/m.

Assessment and outlook

After disappointing Q4 11 growth, primarily driven by weak consumption growth of only 2.5%, we expect it to gain some traction moving into 2012. Hence, healthy retail sales for January put private consumption on track for a rise of 2.5% in 2012. This also adds slight upside risk to our annual GDP forecast of 2.5% (which is already above consensus at 2.1%).