UAW strikes, stalling auto manufacturers

Stocks rallied yesterday after the strong Retail Sales figure gave further credence to the possibility of a soft landing. The ARM IPO drew significant interest pushing the stock higher in its first day of trade and optimism spilled over to the entire market.

Gas, passed. The Census Bureau release of Retail Sales is always a closely watched one. With consumers contributing more than 2/3 to GDP, their… um, our habits at the register are an important factor in economic growth. During times of high inflation, economists may view strong retail sales figures negatively, as strong retail demand is a key driver of inflation. However, weak retail sales figures are also a sure sign of economic strife. So, would we like to see strong retail sales figures, or not? As you probably already know quite well, in the markets and economics, there are always two sides of a story. When yesterday morning’s Retail Sales figure came in hotter than expected, it was anyone’s guess which side of the story the market would adapt. I will skip to the end of this chapter and tell you that the market viewed the strong figure as a positive as it added to the narrative of a soft landing. We could just leave it there, but because it’s Friday, I thought that I would entertain you with an installment of “it’s just math, stupid,” and what better to focus on than yesterday’s retail sales figures.

Let’s start at the top. The headline number, Retail Sales, grew by +0.6% in August. The Census Bureau also releases a number of what it terms as, “special aggregates.” One of them is Retail Sales Excluding Food, and that number came in at +0.6% as well, indicating that Food purchases had very little impact on the headline number. Another aggregate, Retail Sales Excluding Food and Motor Vehicles came in at +0.7%. Here comes the first bit of math 👩‍🔬. Because it is higher than the headline number, this suggests that food and motor vehicles had a negative effect on retail sales, in other words, they were down on the month… um, specifically motor vehicles, because we already established that food had no effect on the headline figure. More specifically yet, there was a -0.1% difference. So, we can assume that folks spent less money on autos between July and August. It’s just math, stupid! Now that we have this under our belt, let’s see what else we can glean from yesterday’s figure. Aha, here is a good one: Retail Sales Excluding Gas Stations. Get out your calculator 🧮. That number showed a +0.1% growth between July and August. Now pay attention.

Because that number does not include (“excluding”) gas stations, we know that the headline figure, which was a higher +0.6%, was influenced by spending at gas stations… a lot of spending… specifically +0.5% of the headline figure can be attributed to gas stations. You just have to use the ➖ button on your calculator. It’s just math, stupid! So now we know that, overall, retail grew last month, but most of that growth came from gas stations. Are you surprised about that? Let’s take it a step further. Was the growth due to increased demand for fuel? It could be as it is…er, was summer in the US and people tend to go on holiday in the summer. That would mean demand for gasoline is seasonal. Well, if we consult the following chart, we can see that while retail sales at gas stations increased by +5.2% in August of this year, they actually decreased by -7.20% last August. So that’s not it. Well, what can it be, then? Let’s see, if we observe gasoline prices, maybe we can get a clue. If we look at the national average of gas per gallon on August 15th versus July 15th, we can see that it increased by +8.67%… IN ONE MONTH. So, if demand for gasoline stayed the same (same amount of total gallons were purchased), the increase in price alone would show an increase in total sales by… you guessed it, +8.67%.

THEREFORE, we can conclude that Retail Sales, grew last month, but not as broadly as it would appear in the headline number. Indeed, +0.5% of the +0.6% was attributed to gas stations, and the growth in gas station retail was quite likely due to the +8.67% increase in the price of gasoline over that period. It’s just math stupid! And that math shows that it was a good month for owners of gas stations… and not-so-much for consumers like you and me. Was it good for the economy? Only time will tell.


Nucor Corp (NUE) shares are lower by -3.10% after the company released preliminary Q3 EPS results that were below analysts’ expectations. Over the past 4 week’s analysts have lowered EPS targets by -3.17%. The company is expected to release its Q3 earnings on 10/24. Dividend yield: 1.23%. Potential average analyst target upside: +3.4%.

Ford Motor Co (F) shares are lower by -1.51% in the premarket after the United Auto Workers union began a strike. General Motors, also affected by the strike is down by -0.27%. The strike was largely expected which means that it may have already been baked into share price before last night’s announcement. Dividend yield: 4.75%. Potential average analyst target upside: +21.7%.



  • Empire Manufacturing (Sept) is expected to have bettered to -10.0 from -19.0.
  • Industrial Production (Aug) is expected to have increased by +0.1% after climbing by +1.0% in July.
  • University of Michigan Sentiment (Sept, preliminary) may have slipped to 69.0 from 69.5.
  • Next week: we will get housing numbers, flash PMIs, and the FOMC meeting mid-week. Check back in on Monday for calendars and details.


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