U.S. Retail Sales Less Than Expected


“U.S. retail sales rose less than forecast in September, as a broad-based increase was overshadowed by a drop in restaurant receipts that may reflect the impact of Hurricane Florence. The value of overall sales rose 0.1 percent for a second month, compared with the median forecast of economists for a 0.6 percent gain, Commerce Department figures showed Monday. So-called retail control-group sales -- which are used to calculate gross domestic product and exclude food services, auto dealers, building-materials stores and gasoline stations -- climbed 0.5 percent, slightly more than estimated. While purchases at food-services and drinking establishments fell 1.8 percent, the most since 2016, most other major retail categories showed a gain, suggesting consumption ended the quarter on a solid note. That indicates the biggest part of the economy will withstand the recent stock-market slide amid low unemployment and tax cuts that have boosted take-home pay. Shopping and consumer activities such as restaurant visits may have been affected in North Carolina and South Carolina in the aftermath of Florence, which made landfall on Sept. 14. At the same time, past experience indicates any negative fallout tends to be temporary and reverses in subsequent months. Steady economic growth and gradual gains in inflation have reinforced investor bets that the Federal Reserve will lift interest rates in December for the fourth hike this year, and stay on a tightening path in 2019.

Economists Forecasts

Estimates for overall retail sales in the Bloomberg survey ranged from gains of 0.3 percent to 1.1 percent. The data capture just under half of all household purchases and tend to be volatile.  Ten of 13 major retail categories showed increases, according to the Commerce Department data. The broad-based improvement reflected rebounds at auto dealers and furniture and home- furnishing stores, which had the biggest gain since April. Purchases at electronics and appliance vendors also rose the most since June; they may have gotten a boost from Apple Inc.s introduction of new iPhone models in late September. Excluding purchases of autos and gasoline, sales were little changed. Filling-station receipts fell 0.8 percent, the report showed. Seasonally adjusted gasoline prices decreased 0.2 percent in September from the prior month, according to last weeks report on the consumer-price index. The Commerce Department figures arent adjusted for price changes, so changes in gasoline costs can affect the retail sales results. Sales at automobile and parts dealers rose 0.8 percent after decreasing 0.5 percent in the previous month, the Commerce Department data showed. Thats consistent with industry reports, which showed sales advanced in September to the fastest pace since March.” (Sho Chandra, Bloomberg - click here to see full article)

My position on MBS:

Short term Stays Neutral.

Long term Stays Short.


Long = I anticipate pricing to improve which leads to lower Rates.

Neutral = Market should stay close to open plus or minimums 25bps.

Short = I anticipate pricing to weaken which leads to higher Rates.

*Short term = 1 - 2 days out

*Long term = 30+ days out