US: Core retail sales suggest continued strong momentum in PCE - Nomura

US headline retail sales fell 0.1% m-o-m in September, surprising to the downside (Nomura: 0.7%, Consensus: 0.6%), driven by receipts at gasoline stations (-0.8%) and eating and drinking service venues (-1.8%), explains the research team at Nomura.

Key Quotes

“There is some downside risk that the slowdown in spending on food and drinking services may be an early sign of moderation in consumer discretionary spending. Excluding this component, total retail sales would have increased 0.4% m-o-m in September.”

“Despite the headline reading, core (“control group”) retail sales increased at a healthy pace of 0.5% m-o-m, mostly matching expectations (Nomura: 0.5%, Consensus: 0.4%). The strong reading appears consistent with the healthy labor market and steady gains in personal income.”

“Moreover, survey measures of consumer-buying plans remain firm despite some moderation, pointing to continued healthy momentum heading into Q4. Discretionary durable goods expenditures remained healthy. Sales at furniture (1.1%), electronics (0.9%), and sporting goods (0.7%) stores all increased firmly.”

“GDP tracking update: September core retail sales were in line with our expectations, but August figures were revised down slightly. On net, our Q3 real GDP tracking estimate remains unchanged at 3.7% q-o-q saar.”