Why the ICSC–Goldman Sachs retail store index recovered last week

Market Realist

Why you should invest in these ETFs to benefit from retail growth (Part 3 of 5)

(Continued from Part 2)

ICSC-Goldman Sachs Store sales Index

After remaining subdued for many weeks, the ICSC–Goldman Sachs store sales index jumped 3.1% year-on-year—the highest since September 2013. The week-on-week increase came in at 1.6%

Unusually cold weather had hampered overall economic growth and, in turn, retail sales in early 2014. The retail sales indices remained subdued in March as well due to a late Easter in 2014. Easter was celebrated on April 20 this year, compared to March 31 last year.

The colder weather also impacted gross domestic product (or GDP) growth, which came in at just 0.1% on an annual basis compared to 2.6% in the fourth quarter of 2013. Market Realist will cover the GDP growth in a different series.

Warmer weather propelled retail sales—particularly at discount stores, apparel stores, and drug stores.

Outlook

As the economy improves, the unemployment rate should lower from the current 6.6%. As more people find jobs, families will have higher disposable income. Higher disposable income will drive consumption growth, benefitting retailers such as Wal-Mart Stores Inc. (WMT), Macy’s (M), and J.C. Penney (JCP). The strong retail sales data also results in increased prices for ETFs such as the SPDR S&P Retail ETF (XRT), as we saw last week.

The improved economy will also benefit the stock market (SPY), as demand will pick up, leading to improved corporate profitability.

To find out about the performance of the Redbook index last week, read on to the next part of this series.

Continue to Part 4

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