Highlights
Retail sales in February were soft at the headline level but surprisingly strong at the core level. Overall retail sales fell back 0.1 percent in February, after a 1.8 percent rebound in January. The consensus had expected a 0.5 percent decline. Excluding motor vehicles, retail sales increased 0.7 percent, after a 1.6 percent gain in January. The ex-auto increase was much better than the market projection for a 0.2 percent slip. While gasoline sales were up sharply, this was not the only factor behind better sales. Excluding motor vehicles and gasoline, retail sales still posted a 0.5 percent advance after jumping 1.4 percent rebound the previous month.

The better-than-expected February sales were not the only good news. January was revised up to an overall 1.8 percent gain from the initial estimate of 1.0 percent.

Overall, retail sales were mixed for February, hence the headline number near flat. But the numbers were nowhere nearly as weak as expected. Outside of gasoline, strength was seen in miscellaneous store retailers, clothing, electronics & appliances, and general merchandise (which includes department stores). Weakness was led by motor vehicles & parts and food & beverage stores.

Overall retail sales on a year-on-year basis in February were down 8.6 percent, compared to down 9.0 percent in January. Excluding motor vehicles, the year-on-year pace improved to down 5.0 percent from down 5.9 percent the prior month.

The merely flat overall sales numbers is good news for equities but should lead to firmer rates. Jobless claims rose this morning but only a little more than expectations. Today's retail sales numbers point to upward revisions to first quarter GDP-which will still be quite negative but not as bad as many have been anticipating.

Market Consensus Before Announcement
Retail sales unexpectedly rebounded in January with a 1.0 percent gain, after a 3.0 percent drop in December. But the stronger number, which came off a low baseline in December, was likely due to heavy discounting to move inventories sitting on store shelves. Excluding motor vehicles, retail sales made a 0.9 percent comeback, after falling 3.2 percent in December. Looking ahead, the news is mixed. Discounters have been doing well in the chain store numbers. But others have not fared as well. The continuing deterioration in the labor market suggests that the bump up in sales in January was temporary. We already know that the auto component will be weak from a 4.7 percent monthly drop in February for unit new motor vehicles.

2009 Release Schedule

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