The US November retail sales report will be released Thursday at 8:30 am ET, here’s a preview of what to expect

The true gauge of the US consumer comes during the holiday season and that’s why retail numbers for November and December are so closely watched.

The narrative in markets is that a better economy and lower gas prices will boost consumer spending in the months ahead. Lower energy prices will me mess spending at the pump but the underlying pace of retail sales — that excludes autos, gasoline and building supplies — is expected to rise a healthy 0.5%, seasonally adjusted.

US retail sales control group - past Novembers highlighted

US retail sales control group – past Novembers highlighted

There are two problems with that narrative.

1. Early reports on Black Friday sales have been mixed. The National Retail Federation said spending was down 11%. The economy might be a bit stronger but it’s after a long slump; wages remain stagnant and consumer credit card bills are mountainous.

2. There is a secular change in the retail market towards online shopping. That is tough to capture in sales data that compares and adjusts to the prior year and makes all statistics a bit dubious.

None of that is reflected by the 24 economists who were surveyed by Bloomberg to provide the consensus. Their estimates are all in a narrow range from 0.3%-0.6% for the control group.

How to trade retail sales

We’re at the point where the US dollar is so overbought that good news isn’t giving it a lift any longer. Last week’s non-farm payrolls obliterated what was left of the skeptics and exhausted the short-term fuel in the US dollar tank.

This week, the US dollar is vulnerable to bad news and the consensus finds itself in an optimistic mood about retail sales. The only number that matters is the control group, so ignore headlines retail sales after the initial knee-jerk.

Retail sales by the numbers:

  • Advance retail sales consensus estimate +0.4%
  • Prior +0.3%
  • Control group (ex-autos, gas & building supplies) exp +0.5%