Word count of the word “weather” in Joe LaVorgna’s latest note explaining away today’s third consecutive miss in retail sales and initial claims: 8. The humor, however, is this punchline: “Eventually, though, we should see some impressive weather-related snapback in economic activity.” Wait, so the weather will deposit a few thousand dollars in all tapped-out US consumers’ bank accounts? You do learn something every day.
From DB’s Joe LaVorgna
Weather likely weighed on retail sales and jobless claims
January retail sales fell -0.4% after December and November sales were revised down three-tenths and one-tenth to -0.1% and +0.3%, respectively. There was broad-based weakness in the details, with motor vehicles (-2.1%) down the most, followed by department stores (-1.5%) and sporting goods sales (-1.4%). Conceivably, inclement weather hurt these highly discretionary categories. In fact, the only five subcomponents that rose in January, and four of these categories likely reflect weather-related spending, were building materials, food & beverage, grocery stores and gasoline. Spending on electronics was up a slight +0.4%, but this follows a massive -4.4% decline in December. Retail control, which excludes food services, autos, building materials and gasoline and which is a direct input into GDP, was down -0.3% in January after rising just +0.3% in December. Adding to the softness of the report was the fact that retail control was revised down in December (+0.3% versus an initially reported +0.7%) as well as November (-0.1% versus a previously reported +0.2%). Given the unusually frigid temperatures seen across much of the country over the past two months, electricity and natural gas usage likely soared. In turn, the bump in utilities spending could help offset some of the weather-related weakness in retail spending with respect to Q1 real GDP.
Initial jobless claims for the week of February 8 increased +9k to 339k which had the effect of bumping up the four-week moving average +4k to 337k. In other details of the report, continuing claims fell -18k to 2953k and this caused the four-week moving average to decline -17k to 2970k. The insured rate of unemployment remained at 2.3%. It is important to keep in mind that adverse weather and seasonal factors can add to the volatility in the claims data around this time of the year. Hence, we are not overly concerned with this morning’s moderate rise in the headline and would instead focus more on the four-week average. Since the four-week moving average on initial jobless claims first fell below 340k last August, nonfarm payroll growth has averaged +177k per month which is close to its underlying trend. This gives us modest confidence that the labor market remains stable despite the recent weakness in the December and January reports which were likely impacted by adverse weather. Next week’s data correspond to the survey period for February payrolls and given the impact of winter storm Pax on the eastern seaboard, we could be setting up for another weather-dampened report. Eventually, though, we should see some impressive weather-related snapback in economic activity.