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November 14, 2012

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Retail sales fell 0.3% in October after an upwardly revised 1.3% increase in the prior month.  At first blush, this headline paints a picture of significantly soft retail sales in October, while details raise questions.  Any assessment of the retail sales in the last two months would take note of the special factors that have affected sales in September (new iPhone sales) and October (and Hurricane Sandy).  All major categories of retail sales posted declines in October, with general merchandise as the only exception.  By contrast, there was a widespread improvement in September retail sales, excluding furniture sales.  Based on this comparison, retail sales during October were disappointing.  Auto sales, both as unit sales and as computed in the retail sales report, fell in October and auto firms have attributed a part of it to bad weather.

 Economic Update Chart 1 11-14-2012

The influence of Hurricane Sandy on the non-auto component of retail sales is unclear because inclement weather rolled out only in the tail-end of October and a special note from the Census Bureau indicates that response rate of participants in the October retail sales survey was not noticeably small.  Therefore, the appropriate conclusion is that retail sales numbers of November and revisions will give a more accurate picture of the impact of Hurricane Sandy and the trend of consumer spending.  It is entirely possible that the October sales data do contain both gains and declines of components of retail sales related to the hurricane.  The more important question is the performance of consumer spending in the fourth quarter. For now, the fourth quarter trajectory of retail sales points to a tepid performance compared with the third quarter.  A retail sales rebound in the November-December period, partly reflecting a bounce back for weather-related reasons, could change the current assessment.  An early Thanksgiving allows for a longer period of shopping than typical; we will be tracking these numbers closely to get a handle on the likely performance of consumer spending in the final three months of the year. On a related matter, revisions to retail sales data, inventories numbers, and trade figure for September point to stronger growth of third quarter real GDP compared with the advance estimate of a 2.0% annualized increase.

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The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.
© 2014 Northern Trust Corporation
 
Carl Tannenbaum
Our Expert
Carl R. Tannenbaum
Chief Economist
 
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Carl Tannenbaum
Carl R. Tannenbaum
Chief Economist
 
Carl Tannenbaum is the Chief Economist for Northern Trust. Prior to joining Northern Trust, Carl led a team at the Federal Reserve Bank of Chicago whose charter was to analyze financial risk, its implication for the broad economy and policy choices to address it. He served as the head of the entire Federal Reserve System's risk group in Washington for a year that ended in March, working closely with Federal Reserve System Governors and senior officials.

He received a bachelor's degree in finance and economics and a Masters of Business Administration degree from the University of Chicago. He is a past chairman of the Conference of Business Economists and also a past president of the National Association for Business Economics, the North American Asset/Liability Management Association and the Bank Administration Institute's Treasury Commission.
 
 
Asha Bangalore
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Asha Bangalore
Senior Vice President and Economist
 
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Asha Bangalore
Asha Bangalore
Senior Vice President and Economist
 
Asha Bangalore is Senior Vice President and Economist at The Northern Trust Company, Chicago. Prior to joining the bank in 1994, she was Consultant to savings and loan institutions and commercial banks at Financial & Economic Strategies Corporation, Chicago. Ms. Bangalore was a faculty member of the Department of Economics, Trinity College, Connecticut, during 1990-1992. She was graduated with a Bachelor of Arts degree from Bangalore University, India. She received Master of Arts and Ph.D degrees in Economics from the University of Connecticut. Ms. Bangalore is a member of the National Association of Business Economists and the American Economic Association.
 
 
 
 
 
 
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