Posted by on October 12, 2016 4:30 pm
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Categories: apple BAC bank of america Census Bureau Department Of Commerce Economy Market Share recovery

Over the past few months, the Bank of America report on internal debit and credit card spending has become arguably the most accurate predictor of any given month’s government retail sales print. Recall that last month’s report, as noted in “The US Consumer Taps Out: BofA Internal Credit Card Data Shows Retail Spending Tumbles“, showed a substantial slowdown in US consumer spending, an observations which was confirmed just days later by a very disappointing retail sales report from the Department of Commerce.

As BofA observed one month ago, “the BAC aggregated card data showed that retail sales ex-autos declined 0.1% mom SA in August. This follows the 0.3% mom decline in July and pushes the 3-month average down to -0.2% mom.” It was right, as the official, seasonally adjusted data confirmed shortly after.

Fast forward to today when we skim the latest aggregated BAC credit and debit card data, and we find that retail sales ex-autos increased 0.4% mom seasonally adjusted in September. This partly reversed the decline over the prior two months. This means that after several disappointing prints in the past few months, the headline retail sales print is likely set to surprise to the upside. However, as BofA also notes, probing further into the data, while Census retail sales ex-autos will likely improve in September,given that part of the pickup owes to gasoline and building materials, we think the risk is that core control sales (retail ex-autos, gasoline and building materials) are softer.

Here are the details:

  • The BAC aggregated card data showed that retail sales exautos increased 0.4% mom SA in September. This reversed the decline over the prior two months, leaving the 3-month average to show a small increase.
  • Contrary to the recent trend, gasoline spending ticked up in September, reflecting higher prices. This contributed to the gain in retail sales ex-autos.
  • Based on the BAC data, we should see Census retail sales ex-autos also improve in September. However, given that part of the pickup owes to gasoline and building materials, we think the risk is that core control sales (retail ex-autos, gasoline and building materials) are softer

The BAC aggregated card data shows that retail sales ex-autos are up 1.9% yoy, nearly matching the growth rate of the Census Bureau data. Based on the BAC data, this is an improvement from the
recent trend where sales were held down in part from lower gasoline prices. BofA adds that both the BAC and Census data show moderation in the growth in retail sales ex-autos since the start of the recovery, but nonetheless evidence that the consumer is still spending.

BofA observes a curious jump in card spending on taxi and limo services, starting in early 2014 with the implementation of a number of “disruptors” to the market. However, after controlling for these companies, we see a decline in credit/debit card spending on the standard taxi and limo companies, implying that the disruptors have taken market share. In other words, American spending on Uber et al has surged while conventional cab services are left in the dust. Moreover, it is likely that these disruptors also intensified the broader industry shift from using cash on these services to credit cards, explaining the dramatic sales growth in this category.

That’s the good news.

The bad news is that while September was supposed to be a strong month for tech-related spending, on the back entirely of just one product, the newly released iPhone 7, BofA did not see any notable spike in associated sales. To wit:

  • The latest version of the iPhone was released in September, which likely contributed to a gain in electronic store sales, following the prior four months of contraction.
  • However, we did not see a spike in electronic store sales akin to prior releases of Apple devices. It may be a reflection of the iPhone 7 or perhaps that the trend in electronic store sales ex-iPhone is sluggish.
  • Moreover, we may see an additional boost to electronics sales in October from iPhone 7 sales.

The rest of the bad news is shown in the six charts below and suggests that spending across 6 core categories, namely food services and drinking places, lodging and airlines, furniture and home improvment, teen and young adult clothing, food and beverage stores and luxury designer retailers, continues to grind ever lower on an annual basis suggesting that contrary to the “recovery” narrative .

The article, "Consumer Spending Deteriorates In September; BofA Finds No iPhone 7-Linked Sales Jump", was syndicated from and first appeared at: http://feedproxy.google.com/~r/zerohedge/feed/~3/36qB7r3nMm4/consumer-spending-deteriorates-september-bofa-finds-no-iphone-7-linked-sales-jump.

You may find more great articles by Tyler Durden on http://www.zerohedge.com/fullrss2.xml/sites/default/files/images/user5/imageroot/draghi/CBO%20August%201.png/%2A%7CFORWARD%7C%2A.

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