Instant View: Retail sales, import prices fall in June

NEW YORK (BestGrowthStock) – Sales at U.S. retailers fell for a second month in June, pulled down by weak receipts at automotive dealers and gasoline stations, according to a government report on Wednesday that added to evidence the economic recovery was proceeding at a moderate pace.

U.S. import prices fell a surprisingly large 1.3 percent in June, the biggest decline since January 2009, led by declining fuel prices, the U.S. Labor Department said on Wednesday.

KEY POINTS:

RETAIL SALES: * The Commerce Department said total retail sales slipped 0.5 percent following a revised 1.1 percent drop in May. * Analysts polled by Reuters had forecast retail sales slipping 0.2 percent last month. * Compared to June last year, sales were 4.8 percent higher. * Excluding autos, sales dipped 0.1 percent last month after dropping 1.2 percent in May. * Markets had expected sales excluding autos to be flat. * Core retail sales, which exclude autos, gasoline and building materials, rose 0.2 percent after slipping 0.1 percent in May.

IMPORT PRICES: * The June drop was the second consecutive monthly decline. * Analysts surveyed before the report had expected a much smaller drop of 0.3 percent. * Fuel import prices fell 4.0 percent, while non-fuel import prices dropped 0.6 percent. * U.S. export prices fell 0.2 percent in June, after rising in the three previous months. * Analysts had expected export prices to rise 0.1 percent in June.

COMMENTS:

TIM GHRISKEY, CHIEF INVESTMENT OFFICER, SOLARIS ASSET

MANAGEMENT, BEDFORD HILLS, NEW YORK:

“There is some conflict in terms of auto sales for June – companies reported better numbers, dealers reported weaker numbers – so you have to focus on the ex-auto number.

“It continues to be corporations, companies that are driving the economic recovery at this point.

“Intel’s strength was really on the corporate side, the enterprise side, but both big and small businesses as they are at the start of a refresh cycle for servers, a very high margin product for them.

“Tech spending is almost in a different category these days, like television was, booze was, it’s the last thing you give up in an economic slowdown.

“The consumer is not dead, the consumer can be very fickle and very subject to short-term fears and short-term elation. We cold really see the consumer come back at any moment here, especially if hiring begins to pick up.

“We think the issues are slowly being worked away and that the market can move higher in a moderate fashion. That’s a wonderful environment for stocks. A slow, steady economic recovery is ideal because it keeps the Fed on the sidelines and continues to provide stimulus.”

PETER BOOCKVAR, EQUITY STRATEGIST, MILLER TABAK + CO, NEW

YORK:

“June retail sales fell more than expected by 0.5 percent but the ex auto decline was in line at down 0.1 percent, and taking out both auto and gas station sales saw a gain of 0.1 percent versus the forecast of flat. The real core figure which excludes autos, gasoline and building materials saw a rise of 0.2 percent after two prior months of declines. Thus, net-net, the headline numbers mask an underlying bounce which was led by electronics, health/personal care, clothing, department stores, restaurant and bars and online retailers.

“The sales data gets plugged into GDP and won’t do much to alter the expectations for a 3.2 percent rise in Q2 with some slowing in the second half. A sustainable rise in sales needs income growth and job creation and those are the two most important economic data points to watch in terms of consumer spending’s contribution to growth.”

JOHN CANALLY, ECONOMIST, INVESTMENT STRATEGIST, LPL FINANCIAL,

BOSTON:

“You are seeing retail price deflation, where you are seeing retailers cutting prices to get people into the stores. These numbers look scarier than they really are. Discretionary spending is mixed.

“The surprise factor that consumers are beating expectations is gone now.

“The labor market is improving a bit, but not as quickly as some people thought. Consumers are paying down debt and increasing savings so this is hurting retailers.

“It will be interesting to see whether the stock market can shrug off this report and focus on earnings, which have been pretty good so far.”

KEVIN FLANAGAN, CHIEF FIXED INCOME STRATEGIST, MORGAN STANLEY

SMITH BARNEY, PURCHASE, NEW YORK:

“The retail sales number is pretty much in line with expectations. You have seen a little bit of cooling on the consumer side of the ledger.”

“I think this is not necessarily indicative of a double dip (recession) and is more indicative of a cyclical slowdown in the U.S.”

JOSEPH TREVISANI, CHIEF MARKET ANALYST, FX SOLUTIONS, SADDLE

RIVER, NEW JERSEY:

“This is not going to move the market very much. But it confirms a very reluctant American consumer which is going to put a stall on any recovery in the United States.”

MARKET REACTION: STOCKS: U.S. stock index futures hold gains after retail sales data. BONDS: U.S. Treasury debt prices steady at higher levels. DOLLAR: Euro edges up versus dollar.

Instant View: Retail sales, import prices fall in June