Advance Retail Sales Signal Consumer Spending Muddling Along
The U.S. Census Bureau conducts the Advance Monthly Retail Trade and Food Services Survey to provide an early estimate of monthly sales by retail and food service firms located in the United States.
Each month, over 5,000 questionnaires are sent to these firms, which represent about 65% of the total national sales estimates. The change is measured against the pervious month using the same units measured month-over-month.
Advance retail sales could be seen as an important indicator because it hints at the sentiment of consumer spending. Consumer spending is highly correlated to the general health of the economy, as consumers account for two-thirds of US GDP.
According to the Census Bureau, advance estimates of U.S. retail and food services sales for April, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $408.0 billion, an increase of 0.1 percent from the previous month, in-line with analyst estimates of 0.1 percent, and 6.4 percent above April 2011.
Total sales for the February through April 2012 period were up 6.6 percent from the same period a year ago. The February to March 2012 percent change was revised from 0.8 percent to 0.7 percent.
Retail trade sales were up 0.1 percent from March 2012 and 6.1 percent above last year. Nonstore retailers sales were up 11.0 percent from April 2011 and building material and garden equipment and supplies dealers were up 10.3 percent from last year.
Traders who believe that advance retail sales are a leading indicator for the US economy, you might want to consider the following trades:
- Long general retail companies like JC Pennny (NYSE: JCP) because they will likely benefit when general retail conditions are favorable, and visa versa.
- Also, long Consumer Discretionary companies like Target (NYSE: TGT) or the Consumer Discretionary ETF (NYSE: XLY)
Traders who do not believe that retail sales are a leading indicator for the general US economy, you may consider alternative positions:
- Long Consumer Staple companies like Procter & Gamble (NYSE: PG) and Colgate (NYSE: CL) because even if retail conditions are unfavorable, consumers still need to buy staple products like shampoo and toothpaste.
- Also, short big-ticket appliance makers like Whirlpool (NYSE: WHR) if advance retail sales are worse than expected.
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