Back-to-school shopping impacts ICSC-Goldman Store Sales Index

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ICSC-Goldman Store Sales Index

The ICSC-Goldman Index is one of the more timely indicators of consumer spending, since it’s reported every week. It gets extra attention around the holiday season when retailers make most of their profits. This weekly measure of comparable store sales at major retail chains, published by the International Council of Shopping Centers (or ICSC) and Goldman Sachs (GS), is related to the general merchandise portion of retail sales. It accounts for ~10% of total retail sales.

ICSC Goldman Sachs index

Highlights of the week of August 2

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The more cold the weather, the more sluggish retail store sales are because store footfalls take a dip. This is what kept the ICSC-Goldman Index at lower levels during the first quarter this year. However, readings are now warming up with the weather with the store-sales up in the week of August 2. August, 5, saw the ICSC-Goldman’s same-store weekly sales tally increase at 0.2% boosted by back-to-school shopping which gets a lift from customary tax holidays this time of year. The year-over-year (or YoY) rate recorded a 4.5% increase.

The four-week average for the YoY rate, which is the best gauge given the ups and downs in the retail sector, was very strong for this report as it increased to 4.1% compared to the 3.8% recorded in the previous week.

Investors’ takeaway

The pattern in consumer spending is often the foremost influence on stock and bond markets. Consumer spending at major retail chains did slowdown 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. As a result, the 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 Index, are the manifestation of increased economic activity.

The Consumer Discretionary Select Sector SPDR Fund (XLY), which includes companies like McDonald’s Corporation (MCD) and Nike Inc. (NKE) in its portfolio, and the SPDR S&P Retail ETF (XRT), are popular exchange-traded funds (or 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 Store Sales in July, the Redbook sales figures were also released on Tuesday, August 5. The next part of this series analyzes the Redbook reading for the week of August 2.

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