US: Retail sales to decrease by 0.3% MoM in March - Nomura

Analysts at Nomura explain that considering the possibility of a significant drag from auto sales, they forecast a decrease 0.3% m-o-m in total retail sales of US.

Key Quotes

“Core (“control”) retail sales (excluding food services, auto parts, gasoline, and building material sales) were relatively weak in January, increasing only by 0.1% m-o-m in February. The weakness in core retail sales was partially attributable to delayed individual tax refunds by the IRS. However, delays in tax refunds suggest that pent-up spending may have positively contributed to March retail sales. Also, consumer fundamentals have been firm, which may have led to some improvement in consumer spending. However, the ISM nonmanufacturing index slipped notably below its peak since the election, portending to some moderation in momentum in this sector.”

“In addition, the weather in March was closer to normal after two unusually warm months. We think that this negative weather impact may have partially offset some recovery in core retail sales. Altogether, considering these downside risks offsetting positive factors, we expect core retail sales to have increased modestly by 0.3% m-o-m.”

“For non-core components, we also expect a sharp slowdown in gasoline stations sales as the seasonal increase in national gasoline prices was muted, offsetting a decent increase in core retail sales. Also, the negative payback from weather points to some weakness in building material sales, which showed outsized gains in past three months, boosted by unusually warm weather.”

“On balance, we expect retail sales excluding autos to have remained flat. Lastly, we expect sales by autos and auto parts dealers to have fallen significantly. March light vehicle sales were weaker than market expectations, down 5.5% m-o-m from the previous month to an annual rate of 16.5mn units. Considering the possibility of a significant drag from auto sales, we forecast a decrease 0.3% m-o-m in total retail sales.”