Business News: Retail Sales, Import Prices, Consumer Sentiment, Business Inventories

Retail Sales, Consumer Sentiment & Business Inventories Offer Reason to Believe

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Three key data points offered investors reason to believe in the economic and investment outlook Friday. Good news in Retail Sales, Consumer Sentiment and Business Inventories & Sales provided solid basis for long-term interests. The stock market is benefiting from the positive business news, with the Dow Industrials up, but just modestly through late morning trade.

Retail Sales

Retail Sales keyed Friday's business news wire. November's Retail Sales increased 1.3% over October, exceeding the consensus of economists forecasts for a 0.9% gain. Sales were an inspiring 1.9% above those of the year ago period. Month-to-month growth was largely driven by a 6.0% increase in Gasoline Station Sales. Retail Trade Sales were up 1.4%, continuing a trend that seems to point toward improving consumer spending. We found even more reason to believe in the segment data: Electronics & Appliance Stores posted 2.8% growth; General Merchandise Stores +0.8%; Department Stores +0.7%; Clothing & Accessories -0.7%. Also, when excluding both gasoline and auto sales, retail sales still improved 0.6%. That's just plain good news.

Sales in the auto market were expected to normalize in November, post "cash for clunkers." Therefore, investors in Ford (NYSE: F), Toyota (NYSE: TM), Honda (NYSE: HMC) and others should find enthusiasm in November's 1.6% increase in the sales of Motor Vehicle and Parts Dealers and 2.0% gain in Auto and Other Motor Vehicle Dealers. Overall sales ex-auto improved 1.2%, above the consensus view for 0.5%, and much healthier than October's "clunkers" weighed 0.0% change (revised).

Import/Export Prices

The business news schedule included a monthly update on Import/Export data. November's Import Price change of +1.7% was significantly greater than the 0.7% increase posted in October. Import prices were driven by a 7.3% increase in fuel prices. That same driver was the key to Gasoline Station sales growth, as seen above. Natural Gas Prices closed the gap on Petroleum, rising 30% on the month. That's likely good news for the shares of natural gas producers like Encana (NYSE: ECA), depending on price hedges in place. ECA's shares ran relatively flat in November, telling me there was little short-term economic benefit due to hedges, but that's without looking into the company. Check for yourself if you are interested...

Economists had forecast an Import Price rise of 1.2%, so the data soured market enthusiasm a bit. Of course, the major driver behind fuel prices was not stellar demand, but dollar demise, offering another reason for American concern. Import Prices have advanced in eight of the last nine months, rising 10.1% over that span. However, this is to be expected (ex-currency) in a positive economic environment.

Export Prices rose 0.8% in November, versus a 0.2% increase in October. While agricultural export prices increased 3.7% in November, non-agricultural drivers contributed two-thirds of the overall increase. Non-Ag export prices rose 0.7% on an absolute basis.

Consumer Sentiment

December's Reuters/University of Michigan Consumer Sentiment Index jumped seven points to 73.4. Economists had forecast improvement, but at a modest pace to 68.2. Also, December's figure measured against the 67.4 reading at last check. This is another significant positive for the tone of trading, and fits well with the Retail Sales improvement.

Business Inventories

A few days after the Wholesale Trade data, Business Inventories were reported for the month of October at 10:00 AM. Wholesale inventories increased 0.3% in October, marking the first rise in over a year. Inventory correction seems to finally be settling, which I view a stealth positive for the Labor Market as well as the obvious boost to near-term GDP from inventory restocking. Regarding labor: as production steadies across industry, layoffs must cease in manufacturing.

Business Inventories rose 0.2%, again marking the first such increase in over a year (August 2008). Economists were caught by surprise, expecting inventories to fall 0.2% through the month. Business level sales rose a strong 1.1%, so we can start looking for inventory rebuilding and the GDP boost that comes with. Inventory-to-sales dropped to 1.3, versus 1.31 in September and 1.37 last year - another good sign.


European Central Bank (ECB) President Jean-Claude Trichet addressed a group in London on Friday. He made a notable statement that he expects the Greek government to make the tough moves necessary resolve its fiscal troubles. National Bank of Greece (NYSE: NBG) shares were down 5.8% in Friday trading though, and were off 16.4% in December.

EPS Schedule

Illinois Tool Works (NYSE: ITW) will hold its investor day. The day's earnings news includes data from HMV Group (LSE: HMV.L), MIRAIL Co. (OTC: MRLCF.PK) and Telecom Res. Services (Euronext: TLC.PA).


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