uploads///Retail Sales

June Oil Price Rebound Affects Auto Companies and Retail Sales

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Dec. 4 2020, Updated 10:52 a.m. ET

Retail Sales data affect XRT

The SPDR S&P Retail ETF (XRT) shed 0.42% on July 14 as retail sales figures in the United States came in way below expectations. According to the July 14 report published by the U.S. Bureau of the Census, retail sales dipped in June. Retail sales figures are subject to a lot of variability.

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Factors affecting retail sales

A myriad of factors affect retail sales data:

  • Household income levels: These depend on labor market conditions (such as the wage rate) to quite an extent.
  • Weather conditions: People tend to refrain from or delay their purchases during winter.
  • Energy prices: A rise in the fuel costs reduces consumers’ disposable income, leading them to avoid certain retail spending.

Rebound in oil prices hurt June retail sales

For June, the rebound in energy prices played its part in affecting retail sales data in the United States (SPY)(IVV). Crude oil, which had touched lows below $50 per barrel in mid-March, has been rising subsequently. It was trading in the $58–$62 range in June. Consumers curb their purchases when fuel costs rise.

Consequently, retail sales took a 0.3% dip in June over May. Excluding autos, retail sales recorded a 0.1% decline over May. Excluding auto and gas, this figure rises to -0.2%, highlighting rising fuel costs’ role in dampening retail sales. Consumer spending on cars, for example, reduces with increased fuel costs. Ford (F) and General Motors (GM) stand to be affected by this phenomenon.

While the rebound in oil prices has benefitted energy firms like Chesapeake Energy (CHK), Range Resources (RRC), and Southwestern Energy (SWN), it’s brought bad news for consumer firms such as Netflix (NFLX) and Expedia (EXPE).

US indicators showed mixed reactions on July 14, and Eurozone indicators were no different, with the European stock market rising despite mixed indicator reports. Learn more in the next part of this series.

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