Analyzing the Redbook and ICSC-Goldman retail sales indices

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ICSC-Goldman Same Store Sales and Redbook indices

Retail sales, excluding food services, make up about 27% of the total U.S. GDP. They’re an important driver for economic growth. An uptick in retail sales usually means upside for broad-based equity markets like the S&P 500 Index (SPY)(IVV)(VOO).

Perhaps more importantly, retail sales are a sign of economic confidence. Consumers tend to spend more when they’re confident about their economic prospects. This tends to benefit consumer discretionary sector ETFs like the State Street SPDR S&P Retail ETF (XRT) and the State Street Consumer Discretionary Select Sector SPDR (XLY).

Part 11

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The ICSC-Goldman Store Sales and Johnson Redbook indices are weekly retail reports that provide an overview of same-store sales growth in the U.S. These indices represent only 10% of the total retail sales in the U.S. As these indices include sales data from major retail chains, like Target (TGT) and Gap (GPS), they’re closely watched by market participants.

Highlights from last week’s releases

  • In the week ended August 23, same-store retail sales rose 4.2% year-over-year, according to the ICSC-Goldman Sachs Store Sales Index. Redbook reported an increase of 4%.
  • Back-to-school demand pushed growth, with both indices reporting healthy year-over-year growth in August.
  • Retail sales strength was also more broad-based across categories.

Outlook

As these indices are weekly indicators, they’re prone to weekly and seasonal fluctuations. Growth is likely to slow in the coming weeks until fall season shopping commences. Seasonal apparel sales should boost both indices then.

The jobs market is a key driver for retail sales. The U.S. Federal Reserve is closely monitoring 19 employment indicators. You can read about the Fed’s take on the recovering labor market in the Market Realist series Fed’s July FOMC minutes have implications for stocks and bonds.

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