US PREVIEW: July Retail Sales Preview: Past The Peak But Still Positive (1/2)

Consensus for Friday's advance July Census Bureau retail sales report is for a 0.1% M/M rise in overall sales (0.2% prior) with ex-autos/gas rising 0.3% (0.4% prior) and Control Group up 0.3% (0.5% prior). 

• The first month of the quarter is a key month for sales, setting both the initial base and the tone for consumption in the quarter. The Atlanta Fed's GDPNow estimate for real PCE consumption in Q3 is 4.1% Q/Q SAAR, which would be the strongest since Q1 2023.
• From the retail sales/goods side of PCE, rates of growth have probably peaked along with sequential inflation this summer and it's unlikely that real goods purchases will again produce the majority of consumption's contribution to GDP as it did in Q2 (+1.08pp, vs +1.04pp for services). But if the Control Group consensus is correct it's set to keep 3M/3M annualized (i.e. quarterly) nominal growth at 8.2%, slower than the 9.7% recent peak in May but still robust.
• The Chicago Fed's Advance Retail Trade Summary (CARTS) eyes a 0.1% M/M advance in ex-auto sales (vs 0.2% consensus). However, that is expected to translate into merely flat real sales growth. (These forecasts came out before the July CPI figures but with the report largely coming out as expected, it probably won't force much of a rethink on nominal retail sales).
• Ex-autos are seen stronger than the overall figure due to an anticipated pullback in the autos column. After June's 2.7% M/M jump in light vehicle sales volumes, which translated into a 2.0% rise in the Census Bureau auto sales series, Omdia reported a 1.2% drop in July (to 16.33 million on a seasonally-adjusted, annualized rate basis).
• Redbook retail sales rose 8.2% Y/Y in July though that's seen as usual to be exaggerating overall retail strength; the ex-autos/gas consensus for the Census Bureau report would roughly translate into a 5.3% Y/Y rate of growth.
• BofA doesn't provide estimates for the July Census retail report but reports in its Hidden PDF that "total card spending growth eased to 5.0% year-over-year (YoY) in July, from 6.3% in June, according to Bank of America internal data. But much of the moderation appears tied to the fading of temporary boosts (i.e., the timing of major online promotions and World Cup-related spending) rather than a broad deterioration in underlying demand. Spending ex-gas still rose a solid 4.3% YoY." That included a seasonally-adjusted drop in overall spending of 0.2% M/M in July, vs the 0.6% they recorded in June.
• In terms of individual retail categories, the above note on "major online promotions" suggests some giveback in the largest retail category, non-store (i.e. online) retail which jumped 1.9% M/M in June for a 10-month best. It's likely Amazon Prime Day (and associated sales by competitors) helped boost this figure which may revert in July.