SMF Notes Motor Vehicle Sales Slow, Remain above 14.0 mln

U.S. motor vehicle sales slowed down in July as domestic sales fell from an upwardly revised 11.3 mln SAAR (from 11.1 mln SAAR) in June to 11.0 mln SAAR. The slight rise in gasoline prices over the month may have played a negative role in attracting sales. Domestic truck sales fell from 6.17 mln SAAR in June to 6.02 mln SAAR in July. Even after the pullback, that was the second strongest sales level since December 2011. Domestic car sales fell from 5.10 mln SAAR in June to 5.01 mln SAAR in July. Import sales growth remained at 3.1 mln SAAR for a second consecutive month, but that was due to rounding as there were slight declines. Import car sales fell from 2.15 mln SAAR in June to 2.12 mln SAAR in July. Import truck sales declined from 0.96 mln SAAR to 0.94 mln SAAR. Altogether, motor vehicle sales fell from 14.38 mln SAAR in June to 14.09 mln SAAR in July. That was the sixth month this year that sales surpassed 14.0 mln.

Year-over-year, sales increased 9% in July after increasing 22% in May. The July gains mostly came from the Japanese manufacturers, who had the advantage of easy comparables following last year's natural disaster and subsequent supply shortages. Honda (HMC, +45%), Toyota (TM, +26%) and Nissan (+16%) all gained market share in July. Growth levels in the Big 3 were generally lackluster. General Motors (GM, -6%) and Ford (F, -4%) both contracted in July but remain in the black year-to-date while sales at Chrylser Group were up +13%. Sales at Hyundai-Kia were up 5.0%.

SMF Notes Initial Claims Remain Biased by Seasonal Adjustment Factors

The initial claims level increased from an upwardly revised 357,000 (from 353,000) for the week ending July 21 to 365,000 for the week ending July 28. That was exactly what the consensus expected. The initial claims level remains biased from poor seasonal adjustment factors surrounding the motor vehicle sector. In July, motor vehicle manufacturers normally shut down for model year retooling. With stronger-than-expected sales growth, many manufacturers opted to not shut down this year and continue production. This should be the last report that suffers from the bias. The continuing claims level fell from an upwardly revised 3.291 mln (from 3.287 mln) for the week ending July 14 to 3.272 mln for the week ending July 21. The consensus expected the continuing claims level to increase to 3.298 mln.

SMF Notes ECONX Factory Orders Tumble in June

Factory orders unexpectedly fell in June. Orders dropped 0.5% after increasing a negatively revised 0.5% (from 0.7%) in May. The consensus expected factory orders to increase 0.6%. Durable goods orders were revised down to 1.3% growth in June from 1.6% in the advance release. Orders increased 1.5% in May. The bulk of the durable orders growth came from a 16.7% increase in aircraft orders. Excluding transportation, durable goods orders declined 1.4%. Nondurable goods orders declined 2.0% in June after falling 0.4% in May. Orders from nearly every nondurable manufacturing sector contracted, including a 2.9% decline in petroleum orders and a 2.1% decline in chemical product orders. Business investment demand weakened in June. Orders of nondefense capital goods excluding aircraft declined 1.7%, which was slightly lower than reported in the advance report.

SMF Notes ECONX IMF Article IV Consultation on United States -Update-

The recovery continues to be tepid, employment remains well below precrisis levels, and the housing market is stabilizing but is still at depressed levels. Downside risks around the outlook have intensified, including from the worsening of the euro area debt crisis as well as the uncertainty over domestic fiscal plans.

-- Fiscal deficit reduction should proceed at a measured pace, to avoid undermining the fragile recovery. Monetary policy remains appropriately accommodative, with room for some further easing if the outlook were to deteriorate.

-- Strong headwinds persist on private consumption, as households continue to deleverage amid weak—albeit stabilizing—house prices.

-- Residential construction has been improving, but from very depressed levels.

-- Business fixed investment seems to have lost some momentum, despite extraordinarily low borrowing costs and relatively favorable financial conditions facing the corporate sector.

-- Net exports failed to add to growth over the last two quarters.

-- Growth is likely to remain moderate in the next two years, constrained by household deleveraging, fiscal restraint, and subpar global demand. Staff projects growth of 2 percent in 2012, and a modest acceleration to 2.3 percent in 2013.

-- The expiring Bush tax cuts and other revenue provisions are assumed to be extended fully for one year, with the tax cuts for upper-income taxpayers assumed to expire from 2014.

-- A stronger dollar and weaker global demand are projected to weigh on exports, with net international trade subtracting from growth over 2012--2017.

-- Risks to the outlook remain tilted to the downside.

-- An intensification of the euro area debt crisis would weigh on U.S. growth.

-- The main domestic downside risk is that inaction driven by political gridlock could prevent or delay key policy decisions which are needed to support the recovery and restore fiscal sustainability.

-- There are also upside risks, however, as pent-up demand could provide more support to the recovery. The authorities agreed qualitatively with staff's views on the outlook and risks, but saw greater upside potential for activity.

SMF Notes SUMRX July Same Store Sales Review— monthly sales see surprising upside

Retailers reported July Same Store Sales before the open today (ZUMZ after the close, COST/FRED already reported comps before the open). Results can be accessed on our Same Store Sales calendar.

Overall July results came in above expectations with sixteen retailers beating estimates—the most since April of last year (three companies missed). Many retailers updated EPS guidance and reported prelim quarterly sales results (most will report earnings in August). Other than ANF/ARO, most of the downside guidance was prelim Q2 sales that was only modestly below estimates.... Upside Guidance/prelim sales: AEO, FRED, GPS, LTD, ROST, TJX... Downside Guidance: ANF/ARO (downside earnings and sales guidance), BKE, BONT, HOTT, JWN, KSS, SSI ... Reaffirmed/In-line Guidance: SMRT.

The retail sector is outperforming the overall market following July Same Store Sales results. The S&P Retail (RLX) is +0.8%, Retail HOLDRS Trust (RTH) +0.4% vs S&P500 index (SPX) -0.3%. Guidance and comps is having mixed effect on the individual retail names. Trading higher: GPS +9.4% M +5% RAD +3.6% APP +3.6% TGT +2.3% KSS +2.4% TJX +1.8% CATO +1.7% LTD +1.5% BKE +1.4% SMRT +1.3% SSI +1.2%, JWN +0.8%, ROST +0.5%... Trading lower: ARO -29.6% ANF -13.1% ZUMZ -6.5% HOTT -6.5% WTSLA -2.4% AEO -1.6% BONT -0.9%.

Some cos that beat July Same-Store Sales estimates include (listed according to the magnitude of the beat):
Gap Inc (GPS) reported comps of 10% vs 3.8% consensus, issued upside Q2 EPS guidance and reported prelim Q2 sales above consensus. The stock opened 8.6% and is now ~10%.
Limited (LTD) reported comps of 12% vs 6.2% consensus, raised Q2 EPS guidance, reported prelim sales above consensus and declared a special dividend of $1 per share . The stock opened lower but is now trading ~2% higher.
Stage Stores (SSI) reported comps of 5.3% vs 2.1% consensus and reported prelim Q2 sales above consensus. The stock opened in the red but is now up 2%. 
Ross Stores (ROST) reported comps of 7% vs 4.3% consensus, raised Q2 EPS guidance, reported prelim Q2 sales above consensus. The stock opened is modestly higher on day.
Only three cos missed July Same-Store Sales estimates (listed according to the magnitude of the miss):
Wet Seal (WTSLA) reported comps of -15.6% vs -12.6% consensus, updated Q2 EPS guidance and reported prelim Q2 sales slightly below consensus. The stock opened flat and is now 3% lower.
Zumiez Inc (ZUMZ) reported comps of 7.5% vs 8.5% consensus (not provide guidance or prelim sales). The stock opened -9.7% and is now down ~7%. 
Saks (SKS) reported comps of 3.5% vs 4.4% consensus (does not update EPS guidance or issue commentary. The stock opened -1.5% and is still near that level.