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By Jason Stipp and Robert Johnson, CFA | 11-14-2012 12:00 PM

Soft Patch for Retail Sales Is Temporary

Retailers are right to expect a better November as consumers bounce back following Sandy and continue holiday shopping, says Morningstar's Bob Johnson.

Jason Stipp: I'm Jason Stipp for Morningstar.

The retail sales report this week came in a little bit light. It was down a tick or two from consensus estimates.

Here to talk about his view of the report and what he expects for the months ahead is Bob Johnson, our director of economic analysis.

Thanks for joining me, Bob.

Bob Johnson: Great to be here.

Stipp: The report was a bit underneath consensus. Tell me about that headline number, and did it meet your expectations?

Johnson: The headline number [showed] retail sales were down 0.3%, and people thought maybe they'd be down 0.10%.

What happened is we had a really great September, and there were things like the iPhone that really helped September that we knew weren't going to help October. And September numbers in general very strong, kind of not sustainable, and we had warned about that. And sure enough we got a little bit of payback this month.

The number was in line with what I had been thinking, probably a little bit weaker than consensus. But given what I had thought about the iPhone and a couple of other things in there, the numbers [for October] don't surprise me at all.

Stipp: So if you looked at that two-month chunk, September and October, to kind of pull out some of that noise, what does the trend look like then?

Johnson: I think we're pretty good. I think we're still relatively intact, although I like to look at the data year-over-year, too, and there we're just a little soft. We've been in that 4% to 6% range year-over-year. We ticked just under 4% for the first time here in a while, at 3.7% year-over-year growth. At the month-end, we did have some Sandy impacts on the numbers that we can talk about.

Stipp: So let's talk about some of the underlying data and the storm, which did hit at the end [of the month]. A couple of notable things in the underlying retail sales [report] were gas and groceries, and you think there's some storm effect. Let's talk about that.

Johnson: Those are on the positive, then we'll talk about autos on the negative.

Gasoline was actually up 1.5% in the month, and that's in terms of sales dollars, and that came as a bit of a surprise, because prices were actually down during the month of October. So we would have suspected that we would have seen a decline in that number, but apparently there was some buying in anticipation of the storm that pushed that number up a little bit.

Stipp: So this report is not inflation-adjusted.

Johnson: No.

Stipp: So if you're seeing [growth in gasoline sales while gasoline prices were declining], it means there was more demand.

Johnson: Yes. And even without that, the 1.5% growth in gasoline sales was a bit surprising in terms of its strength. And then food being up 0.8% was probably people stocking up for the storm.

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