uploads///Month over Month Change in Retail Sales

Why Did Advance Retail Sales Fall for the Third Month in a Row?

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Advance retail sales disappoint

Cold weather kept Americans from heading outdoors and shopping in February 2015. Consumers also seemed cautious about spending their windfall from falling gasoline prices. Advance estimates of retail sales stood at $437 billion in February 2015. This was 0.6% lower than the level last month. It followed an unrevised 0.8% decline in January 2015. This fall makes February the third month in a row that retail sales fell.

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A fall in retail sales advances the view that economic growth is slowing. Consumer spending makes up ~70% of GDP (gross domestic product). This isn’t good news for investors in ETFs like Consumer Discretionary Select Sector SPDR Fund (XLY) and the Consumer Staples Select Sector SPDR Fund (XLP). XLY invests in companies’ stock—like Home Depot (HD), Amazon (AMZN), and Starbucks (SBUX). These companies account for a little over 15% of XLY.

Broad-based equity ETFs—like SPDR S&P 500 ETF (SPY), the SPDR Dow Jones Industrial Average ETF (DIA), and the iShares Core S&P 500 (IVV)—wait for the report due to its implications on economic growth. It’s important to note that these numbers are volatile and subject to revisions.

Excluding motor vehicles and parts, retail sales fell 0.1% in February. The fall for January was revised downwards to a 1.1% decline from a previously reported 0.9% fall.

On a YoY (year-over-year) basis, retail sales were up 1.7% from February 2014. This was lower than the 3.6% rise that was seen in January 2015. Excluding auto sales, retail sales are only up 0.8% from a year ago.

Auto sales fall

Motor vehicle and parts dealers saw sales fall 2.5% in the month. This was the largest decline in the past year. In January, the fall in auto sales was revised to show a rise of 0.5% instead of a previously reported 0.5% fall.

Gasoline stations’ sales rose for the first time since May 2014. Rising gasoline prices increased sales by 1.5% in February. They fell by 9.8% the previous month. This was downwardly revised from a 9.3% fall reported earlier.

Eating out and other segments

Consumers also ate out less in the month. Food services and drinking places reported a 0.6% fall in monthly sales after a downwardly revised 0.2% fall in the previous month. Earlier, January reported a 0.8% rise in sales from this segment.

On the positive side, sporting goods, hobby, book and music store sales rose 2.3% in February. They reported a larger-than-estimated 3.5% decrease in January.

Purchases at department stores, excluding leased departments, fell 1.4% in February. They fell by an unrevised 0.7% in the previous month.

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