Soggy August Data, Some Storm Effects
- Retail Sales decreased by 0.2 percent in August, weighed down by weak auto sales.
- Industrial Production decreased by 0.9 percent in August, with drag from Hurricane Harvey.
For much of the U.S., August was an uneventful month occupied with back-to-school shopping and end-of-summer vacations. However, for the residents and businesses of South Texas and Southern Louisiana, August ended with a nightmare storm that disrupted everything, including shopping patterns. Retail sales data for the entire U.S. was mostly normal, but auto sales fell more than expected as South Texas auto dealers lost the last weekend of the month to the storm. Total retail sales for the U.S. dipped by 0.2 percent for the month. The dollar value of retail sales for autos fell by 1.6 percent. Unit auto sales dipped from a 16.77 million unit rate in July, to 16.14 in August, a 3.7 percent decline. We expect to see stronger U.S. auto sales in September as Texas, Louisiana and Florida residents and businesses replace their storm damaged vehicles. Building materials sales for August dipped by 0.5 percent. This is another area where we could see a rebound in September due to the clean-up after Harvey and Irma. Gasoline station sales increased by 2.5 percent. The gain in gasoline sales was likely a combination of price effects and pre-storm preparation. We look for strong retail sales of gasoline in September due to higher gasoline prices. The soggy retail sales for August are a damper for Q3 GDP estimates, but there is potential for a rebound in September sales that could counteract the drag from August.
Industrial production dipped by 0.9 percent in August with declines across the three broad industry groups, manufacturing, mining and utilities. The effects of Hurricane Harvey in the industrial production data for August are largely based on estimates by the Federal Reserve. As field data is collected, these estimates will be updated in the coming months. Here is what the Federal Reserve came up with for August industrial production: manufacturing output was down by 0.3 percent as petroleum products and chemicals output fell. We expect to see more drag in manufacturing in September as refineries and petrochemical plants slowly resume normal operations. Utility output was down by 5.5 percent in August, likely weighed down by Hurricane Harvey. In September, the lasting power outages in Texas, Louisiana and Florida (due to Harvey and Irma) will likely weigh on utility output again. Mining output dipped by 0.8 percent in August. Drag on mining output could also roll into September as Gulf Coast oil field workers focus on their homes and families early in the month.
Market Reaction: Equity markets are up. The 10-year Treasury yield is up to 2.20 percent. NYMEX crude oil is up to $49.91/barrel. Natural gas futures are down to $3.07/mmbtu.
For a PDF version of this Comerica Economic Alert click here: Retail_Sales_09152017.
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