The ICSC-Goldman Sachs store sales
The ICSC-Goldman Sachs index is one of the more timely indicators of consumer spending, since it is reported every week. It gets extra attention around the holiday season when retailers make most of their profits. Published by the International Council of Shopping Centers and Goldman Sachs (GS), this weekly measure of comparable store sales at major retail chains is related to the general merchandise portion of retail sales. It accounts for roughly 10% of total retail sales.
Highlights of the week ending July 26
The more cold the weather, the more sluggish the retail store sales, as store footfalls take a dip. This is what kept the ICSC-Goldman Sachs index at lower levels during the first quarter of this year. But readings are now warming up with the weather—store sales were up in the week of July 26. July 29 saw the ICSC-Goldman Sachs same-store weekly sales tally rise at a 0.2%—boosted by back-to-school shopping—as compared to the -0.4% reading in the previous week. The year-on-year rate rose to 4.6%, compared to the 2.8% recorded in the prior week.
The four-week average for the year-on-year rate, which is the best gauge given the ups and downs in the retail sector, is at 3.8%. This 3.8% is very strong for this report. Reflecting impressive strength at department stores, apparel stores, and electronic stores, the report describes the whole of July as a positive month.
The pattern in consumer spending is often the foremost influence on stock and bond markets. Consumer spending at major retail chains did slow down in tandem with the equity market in 2000 and during the 2001 recession. Sales weakened again in 2008 and 2009 due to the credit crunch and recession. So, increase or decrease in retail sales has a direct bearing on the financial markets.
Stock investors vouch for strong economic growth, which translates to healthy corporate profits and higher stock prices. For bond investors, the focus is whether economic growth goes overboard and leads to inflation. Steep movements in consumer spending, as indicated by retail sales indicators such as the ICSC-Goldman Sachs index, are the manifestation of increased economic activity.
The Consumer Discretionary Select Sector SPDR Fund (XLY)—which includes companies like McDonald’s Corp. (MCD) and Nike, Inc., (NKE) in its portfolio—and the SPDR S&P Retail ETF (XRT) are popular ETFs in the consumer discretionary equities ETF category. Changes in consumer spending are reflected in the performance of these ETFs.
Along with the lift in the ICSC-Goldman Sachs store sales in July, the Redbook sales figures were also released on July 29. The next part of this series discusses the latest figures recorded by Redbook.