Previewing February Retail Sales

A Primer for Tomorrow's Data Release

Retail sales data for February is set to be released tomorrow, with expectations of a 0.8% increase month-over-month (m/m) following a 0.8% decline in January. This rebound comes as some analysts anticipate payback from the soft January print, which was partly attributed to seasonal adjustment issues.

However, a boost is expected from stronger auto sales and higher gasoline prices, potentially offsetting any potential drag from delayed tax refunds and shifting wallet share towards services with sticky inflation rates.

Rebound in Retail Sales Following Seasonal Adjustments

Economists predict that retail sales will experience a rebound in February due to the expected release of delayed tax refunds and an improvement in seasonal factors compared to January's underwhelming print.

Despite these positive expectations, some analysts believe that a below-normal boost from seasonal factor adjustments may still be present in February, potentially dampening the overall growth rate for retail sales.

Auto Sales and Higher Gasoline Prices Provide a Tailwind

Some experts have highlighted that stronger auto sales and higher gasoline prices could serve as tailwinds for headline retail sales figures in February. This is particularly significant given that auto sales have been a major driver of consumer spending in recent months.

Delayed Tax Refunds: A Potential Drag on the Control Group?

While the overall retail sales data may see an uptick, some economists are concerned about the potential impact of delayed tax refunds on the control group, which excludes auto sales and gasoline prices. This could lead to a weaker-than-expected performance for the control group, despite improvements in other sectors of retail sales.

Shifting Wallet Share Towards Services

In addition to these factors, some economists have pointed out that retail sales may be dented by a shift in consumer spending towards services, where inflation rates remain relatively high. This could contribute to slowing consumption growth and pose challenges for retailers as they navigate this changing landscape.

Impact on Consumer Resilience Theme

Although the upcoming retail sales report is not expected to have a significant impact on the broader consumer resilience theme, some recent signs of labor market easing have been flagged as another potential driver of slowing consumption growth in the coming months.

As such, it will be crucial for investors and policymakers to closely monitor these trends and adjust their strategies accordingly.

Closing Thoughts

In conclusion, retail sales data for February is anticipated to show a rebound following January's decline, with expectations of a 0.8% increase m/m.

While there are several factors supporting this growth, including stronger auto sales and higher gasoline prices, potential headwinds such as delayed tax refunds and shifting wallet share towards services with sticky inflation rates could still pose challenges for retailers.

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