Must-know update: Are retail sales poised for a spring surge?

Market Realist

A must-know investor's guide to the evolving consumer health (Part 4 of 8)

(Continued from Part 3)

What is the Johnson Redbook Index?

The Johnson Redbook Index report for the week ended March 8, was released on March 11. The index is a weekly measure, designed to capture the same-store sales growth at chain stores, discount stores, and departmental stores. The index provides guidance on retail sales trends, but covers only about 10% of the total retail sales in the country.

What did the last index reading indicate?

Year-on-year growth in the same-store sales came in at 2.5% for the week ended March 8, down 0.4% from the previous week and the lowest since last May. Week-on-week growth in retail sales came in marginally higher at 2.8%, an increase of 0.3% over the previous week. Week-on-week growth in retail sales is computed as the month-to-date increase over the average for the previous month. The slower growth was attributed to unfavorable winter weather, keeping consumers away from stores.

International Council of Shopping Centers (or ICSC)-Goldman Sachs Retail Chain Store Sales Index

The ICSC-Goldman Sachs Retail Chain Store Sales Index (or the Index) report for the week ended March 15, was released on March 18. The index measures the change in the same-store sales based on a sample that includes major retail chains that are statistically representative of sales in the retail industry. The Index reading does not include vehicle and restaurant sales. Like the Johnson Redbook Index, it covers only about 10% of the total retail sales in the country.

What did this week’s reading indicate?

According to the reading for the week ended March 15, the retail same-store sales grew 0.7% and 1.5% week-on-week and year-on-year, respectively. However, both readings were down from last week when sales grew by 1.3% and 2.1% week-on-week and year-on-year, respectively.

“Stores geared to discretionary items performed best over the week with gains in furniture, department and non‐apparel specialty. Office‐supply stores also saw business pick up,” said Michael Niemira, ICSC Vice-President of research and chief economist.

Major publicly listed retailers in the furniture, department, and non-apparel specialty businesses include home-improvement retailers Home Depot (HD) and Lowe’s (LOW). These retailers are getting a boost from the growth in the housing sector. The National Association of Home Builders (or NAHB)/Wells Fargo (WFC) Housing Market Index (or HMI), rose from 41 in April 2013, to 57 by the end of 2013, indicating the increase in housing activity in the economy. An ETF with exposure to the housing sector, is the iShares U.S. Home Construction ETF (ITB), which tracks the performance of the Dow Jones U.S. Select Home Construction Index. The index measures the performance of the home construction sector of the U.S. equity market.

One ETF that has exposure to the investment-grade bond market is the Vanguard Total Bond Market ETF (BND), which tracks the Barclays Capital U.S. Aggregate Bond Index. The index is composed of investment grade bonds in the U.S., including government, corporate, and international dollar-denominated bonds, as well as mortgage-backed and asset-backed securities with a maturity in excess of one year.

Move on to Part 5 to read about the implications of retail sales growth for fixed income investors.

Continue to Part 5

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