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Restaurant Investors Can Use the Recent Johnson Redbook Index

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The Johnson Redbook Index

The Johnson Redbook Index is another indicator of retail sales in the United States. The index declined to 1.2% in the first week of June 2015, from 1.7% the previous week. The index was at 3.3% in the corresponding week of 2014.

Retail sales came in lower because Father’s Day is in the fourth week for 2015. It was in the third week of June in 2014. Excluding this effect, the Johnson Redbook Retail Sales Index indicates weaker data year-over-year for the first week of June 2015.

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Interpreting the index

The Johnson Redbook Index, like the ICSC-Goldman Index, reports weekly consumer spending at US retail stores. The index is made up of sales data from discounters, chain stores, and department stores. The ICSC-Goldman Index is considered a more consistent indicator than the Johnson Redbook.

Johnson Redbook provides a general view of consumer sentiment toward the retail sector. Although Johnson Redbook doesn’t include restaurant sales, investors should look at this indicator to get a sense of where the economy is headed from a retail sales perspective. This will benefit investors in the Consumer Discretionary Select Sector SPDR Fund (XLY). XLY holds restaurant stocks such as Darden Restaurants (DRI), Starbucks (SBUX), 1.5% of Yum! Brands (YUM), and 1% of Chipotle Mexican Grill (CMG).

Restaurant investors should also consider the health of the employment situation and how the overall job market is performing. After all, if people have jobs, they have money to spend and money to go out to eat. In the next part of this series, we’ll look at the US Initial Jobless Claims report.

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