POWER: Colder February Lifts Polish February Despite Stretched Technicals

Moving beyond the release of the delayed Census Bureau retail sales report that showed strong activity in October, the Johnson Redbook Retail Sales Index posted gains of 6.2% Y/Y in the week ending December 13, an acceleration from 5.9% in the prior week. 

• That brought month-to-date sales to 5.9%, which coming off a 6.4% gain in November suggests that retail momentum continued through the latter 2 months of Q4.
• This points to further Y/Y rises in core Retail Sales through November at least, albeit with the usual caveat that these are in nominal terms.
• The report notes that we have entered the busiest retail period of the month: "Procrastinating shoppers have one more week to complete their holiday shopping. More consumers are opting to give experiences, such as classes, events, or tickets, as gifts. Additionally, secondhand and vintage items are becoming increasingly popular for gift-giving. National chain stores often run frequent promotions, which can diminish the value of discounts. Online shopping continues to thrive, and the popularity of gift cards has made it easier for many shoppers to delay their holiday purchases. The two busiest weeks in December are typically those immediately before and after Christmas. Retailers continue to sit out the pre-Christmas wait."

• +7,500 TUH6 104-12.125, buy through 104-12 post time offer at 0959:00ET, DV01 $298,000.
• The 2Y contract trades 104-12.62 last (+1.5)

Retail sales growth was flat in October after rising 0.1% prior, a little softer than the expected 0.1% gain - but core sales were significantly stronger than expected, implying strong retail momentum at the start of Q4.

• The Census Bureau's delayed report showed Control retail sales grew at the fastest monthly pace since June in October, with a 0.85% M/M gain (0.4% consensus) more than reversing September's unexpectedly poor -0.09%. Overall ex-autos sales grew by 0.4% (0.1% prior; 0.2% consensus), with ex-autos/gas up 0.5% (just under 0.0% prior, 0.4% consensus).
• The headline/core divergence was widely expected on account of soft gasoline (7-month worst -0.8% M/M) and auto (6-month worst -1.7%) sales, neither of which are included in the Control Group.
• Among other key categories, non-store retailers saw a 1.8% M/M jump after September's rare contraction (-0.4%) that had dragged on Control sales.
• In less good news, food services/drinking places sales (not in the Control Group) fell 0.4% for the worst performance since February. Indeed it was really only ex-Control categories that contracted M/M, with the other being building materials (-0.9%, 3rd drop in 4 months); the only Control Group included category to see a drop was Health and Personal Care (-0.6% M/M).
• The implied Control Group's 3M/3M annualized rise of 6.1% is a step down from 6.5% in the prior 2 months, but September's marked the best quarterly figure since Q1 2023 so this was still impressive.
• All of these should be taken with the caveat that they are in nominal terms, but at least nominal momentum appears to have been carrying through to November and December per "alternative" retail sales reports.