Last week economic statistics were strong, but markets were fairly flat. Retail sales grew substantially, but did markets believe the data?

August retails sales were negative 0.2%, mostly a result of the hurricanes reducing demand. September showed a much different reading as last week’s release revealed a robust increase of 1.6%.

As in the month before, this reading had much to do with the hurricanes, for several reasons. 1) The pent-up spending that did not occur in August shifted forward to September. 2) The cost of replacing goods, specifically automobiles, boosted the September data. 3) The purchase of goods in support of relief efforts skewed figures.

So why were markets not more responsive to the retail sales number? They actually did. Auto makers increased anywhere from 1% to 3% on the news, however, the broad markets saw the data as a temporal shift that did not change the landscape of consumer spending.

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