Disappointing Retail Sales Lowers GDP Estimate
According to Deutsche Bank’s Global Markets Research by Joseph LaVorgna and Carl Riccadonna, lower retail sales figures is likely to put even more downward pressure on Q2 GDP.
June retail sales were much softer than expected; headline sales fell -0.5% as motor vehicle sales were down -0.6%. Excluding autos, sales were down -0.4%, as there was broadbased weakness across the various subcomponents: furniture (-0.8%), electronics (-0.8%), building materials (-1.6%), health/personal care (-0.7%), sporting goods (-1.6%), general merchandise (-0.2%) and restaurant (-0.2%) all fell; gasoline spending was down (-1.8%), but this was not a surprise given the weakness in retail prices which over time is a positive for households.
As a result, there have been downward revisions for Q2 estimates and has led to increased pessimism.
With respect to revisions, May was basically unrevised April was revised down: headline and ex auto sales were lowered -0.3% in April to -0.5% and -0.6%, respectively. The net effect of weaker than expected retail sales, inclusive of revisions, is less Q2 consumption which we are tracking at +1.3%. This would lower our forecast of Q2 real GDP by another 0.4% to +1.0%.
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