Market Insider

Street economists cut Q3 GDP estimates after retail sales miss

A shopper browses the fresh meat case at a Kroger-owned store in Orland Park, Illinois.
Daniel Acker | Bloomberg | Getty Images

Wall Street economists trimmed their third-quarter growth estimates to below 3 percent after retail sales fell more than expected in August.

Third-quarter GDP tracking estimates fell 0.2 percent to 2.8 percent, according to the median estimate of economists polled in CNBC/Moody's Analytics GDP rapid update. The average estimate was 2.9 percent.

In the second quarter, real GDP grew at an annual rate of 1.1 percent, according to the second estimate by the Bureau of Economic Analysis. First-quarter GDP grew by 0.8 percent.

U.S. retail sales fell a more-than-expected 0.3 percent in August, the Commerce Department said Thursday. The control figure also fell, down 0.1 percent versus forecasts for a 0.3 percent increase.

The control figure correlates to consumption in GDP and excludes things like automobiles, gasoline, building materials and food services.

Other data released Thursday included U.S. industrial production, which fell a more-than-expected 0.4 percent in August after a downwardly revised 0.6 percent increase in July. U.S. producer prices were flat in August, missing expectations for a slight rise.

Separately, the U.S. inventories report showed little change in July from the prior month as retail inventories fell 0.3 percent. Retail inventories excluding autos also fell 0.3 percent.

After the data, Goldman Sachs lowered its third-quarter GDP tracking estimate by one-tenth to 2.9 percent.

"Core retail sales were softer than we had anticipated, and imply a bit less consumer spending on goods. The industrial production report showed slightly higher vehicle assembly than we had anticipated, and the business inventories report showed slightly higher levels of retail inventories," Elad Pashtan, senior U.S. economist at Goldman Sachs, said in a Thursday note.

Data dump ahead of the Fed

Barclays said the retail sales report lowered its third-quarter GDP tracking estimate by two-tenths to 2.6 percent on a seasonally adjusted annual rate.

"The data imply lower (personal consumption and expenditures) than we had estimated (2.5 percent from 2.6 percent) at the back of slightly softer core and food sales," Barclays Chief U.S. Economist Michael Gapen said in a report Thursday.

"In addition, lower sales of building materials, furniture and appliances brought our tracking estimate for residential investment down too," he said. "The (industrial production) report for August left our GDP tracking estimate unchanged after rounding as softer inventories were offset by stronger structures investment."

After the retail sales report, the Atlanta Fed's GDPNow model for third-quarter GDP growth declined to 3.0 percent, down from 3.3 percent on September 9.

Chris Rupkey, chief financial economist at MUFG, said in a note Thursday that the firm will stick to its 2.5 percent growth estimate. "If GDP is close to 3 percent this quarter it will only be due to a one-off jump in inventories rebuild that does nothing for the growth outlook in future quarters," he said. "The economy is sputtering."

The BEA's third estimate on second-quarter growth is scheduled for release on September 29, and the initial estimate on third quarter growth is due for release on October 28.

Reuters and CNBC's Patti Domm and John Schoen contributed to this report.