US: Strong retail holiday season points to a solid Q4 GDP - Wells Fargo

On Friday, the first estimate of Q4 GDP will be released. Analysts from Wells Fargo, estimate that retail sales details point to strong personal consumption expenditures (PCE) and overall GDP growth in the final quarter of the year.

Key Quotes: 

“Nominal retail sales figures surged through the final months of the year, suggesting 2017 sales ended on a solid note for the fourth quarter. Similarly, increased spending around the holidays, as well as significant improvement in control group sales since September, point to increased real retail sales for the final month of the year.”

“The strong end-of-year for nominal retail sales, specifically seen in holiday retail and control group sales, presages a good end-of-year for real personal consumption expenditures (PCE) as well as overall GDP growth.”

“Sectors linked to the housing market were particularly strong in 2017; a reflection of the strength in the housing sector of the U.S. economy.”

“Despite some pick-up related to hurricane effects, nominal sales figures suggest slowing within the motor vehicles and parts dealers’ Sector”.

“The non-store retail sector experienced some slowing in 2017, although sales remain elevated.”

“Growth in the overall food services and  drinking places sector appears to have slowed in 2017; however, nominal figures suggest slight improvement in December.”

“End-of-year trends in retail sales suggest elevated real retail sales figures to close the year. In analyzing individual sector trends through November, it is evident that underlying strength exists within recent consumption habits, and it is likely that such trends continued into the final month of the year. Similarly, an exceptionally high holiday sales season coupled with the end-of-year improvement in control group sales are in line with the high nominal sales figures for December, and further suggest elevated consumption habits to close 2017.”

“We expect PCE growth to come in at 3.8 percent in Q4-2017. Nominal as well as real figures point to elevated sales through the final quarter of the year and warrant such expected gains in consumption.”