Monday, October 15, 2012

September Retail Sales, NY Fed Mfr. Survey, & more ...

Details regarding September's retail sales report and October's NY Fed manufacturing survey results are provided below.  We have also included our forecast for the September industrial production and capacity utilization numbers, which are due out tomorrow morning.
Retail Sales (September) 
  • The initial retail sales report for September came in better than most analysts expected; a 1.1% sequential increase versus the analysts' 0.7% estimate. 
  • Excluding auto and gasoline sales, retail sales grew 0.9%, significantly better than the 0.5% consensus.
  • Based on the data provided by the Dept. of Commerce, the 4.5% growth in sales of electronics and appliances appear to have been the driver behind the better than expected retail numbers.  We could assume that at least the initial sales of Apple's (AAPL) iPhone5 could be partially responsible for this growth. 
  • Such good numbers could be too good and too early.  They could negatively impact sales during Christmas season, given that overall wage growth remains stagnant. 
  • Auto and parts sales went up 1.3%, while sales at gasoline stations increased 2.5%
  • We note that the August figures were revised higher.  Overall retail sales were bumped up 40bps to 1.3%.  Excluding autos and gasoline, that figure was revised higher by 20bps to 0.3%. 

Empire State Mfr. Survey (October)
While the September retail sales surprised on the upside, NY Fed's manufacturing survey for October was disappointing.  The overall index came in at -6.16, an improvement from September, but below the -3.0 consensus.
  • New orders sub-index remained negative at -8.97, but yet better than the prior month's -14.03.  This figure has been below zero for four consecutive months, after being in positive territory for seven months in a row. 
  • Not surprisingly, without much improvement in new orders, the shipment sub-index also dipped into negative territory; -6.40 in Oct., from 2.75 in Sept.
  • Downward trend in the employees sub-index continued for the third straight month as that figure came in at -1.08, certainly a worsening from September's 4.26.  Given that the workweek number also deteriorated, we do not expect much improvement in next month's Empire State Mfr. employees sub-index. 
  • The inventories sub-index was -2.15, down from prior month's 0.00.  Initially, we thought we might see some inventory replenishment next month; however, the forward-looking inventory sub-index proved us wrong.  That figure remained pretty much unchanged at -4.30. 
  • Most of the survey's forward-looking indicators show that optimism is slowly declining.  The general business conditions fwd index declined to 19.42, from 27.22 in September.  Fwd new orders sub-index dipped to 15.05, from 17.02. 
  • It appears that more manufacturers are expecting an increase in prices that they pay and in prices that they receive during the next six months. 
  • No change is expected in the number of employees during the next six months.  However, average workweek will likely decline further as that fwd sub-index came in at -11.83, a significant decline from prior month's 2.13.
  • Many more manufacturers are also expecting less CapEx during the next six months.  Lastly, the fwd technology spending sub-index was pretty much unchanged at 7.53.

Other possible market moving economic indicators are due out tomorrow, including the September CPI for which the consensus is 0.5% (core CPI consensus is 0.2%) and NAHB's housing market index (consensus is 41.0).  September industrial production and capacity utilization, for which we have our own models, will also be released tomorrow.  We expect the industrial production index to come in at 97.5, approx. 70bps higher than the prior month's 96.8.  The consensus is 97.0.  In addition, we have projected a capacity utilization rate of 78.8%, up from August's 78.2%, and above the 78.3% consensus. 
Housing starts and permits stats are due out on Wednesday morning.  The market expects 765K and 810K for starts and permits, respectively.  Initial jobless claims from last week will be released on Thursday.  The consensus is 365K, a significant increase from the prior week's surprisingly low 339K.  Although we do not usually project the initial jobless claims, we do expect Thursday's number to be higher than the consensus as not only will the upward revision trend of this economic indicator continue, but we also note that the applicable seasonal factor is less than the prior week's.  In other words, the 26K increase in initial claims that economists are looking for require only an increase of 10K in the non-seasonally adjusted initial claims number.  Philly Fed's manufacturing survey will also be released on Thursday.  The Street expects that index to move slightly into positive territory, 0.5.  Lastly, September existing home sales numbers are due out on Friday morning.  The consensus is 4.75mil.

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