Retail ETF in Focus as September Retail Sales Improve Significantly

Retail saleFrom Doug Short: The Census Bureau’s Advance Retail Sales Report for September released this morning showed a welcome improvement over the August decline.

Headline sales came in at 0.6% month-over-month to one decimal, and August was revised upward from -0.3% to -0.2%. Today’s headline number matched the Investing.com. Core sales (ex Autos) came in at 0.5% MoM, which beat the Investing.comconsensus of 0.4%.

Here is the introduction from today’s report:

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for September, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $459.8 billion, an increase of 0.6 percent (±0.5%) from the previous month, and 2.7 percent (±0.9%) above September 2015. Total sales for the July 2016 through September 2016 period were up 2.4 percent (±0.5%) from the same period a year ago. The July 2016 to August 2016 percent change was revised from down 0.3 percent (±0.5%)* to down 0.2 percent (±0.2%)*.

Retail trade sales were up 0.6 (±0.5%) from August 2016, and up 2.2 percent (±0.7%) from last year. Nonstore retailers were up 10.6 percent (±1.6%) from September 2015, while Food services and drinking places were up 6.1 percent (±3.3%) from last year. [view full report]

The chart below is a log-scale snapshot of retail sales since the early 1990s. The two exponential regressions through the data help us to evaluate the long-term trend of this key economic indicator.

Retail Sales Trends

The year-over-year percent change provides another perspective on the historical trend. Here is the headline series.

Retail Sales YoY

Core Sales

Here is the year-over-year version of Core Retail Sales.

Core Retail Sales YoY

“Control” Purchases

The next two charts illustrate retail sales “Control” purchases, which is an even more “Core” view of retail sales. This series excludes Motor Vehicles & Parts, Gasoline, Building Materials as well as Food Services & Drinking Places. The popular financial press typically ignores this series, but it a more consistent and reliable reading of the economy.

Control Sales Trends

Here is the same series year-over-year. Note that the current level is fractionally below the highlighted values at the start of the two recessions since the inception of this series in the early 1990s.

Control Sales YoY

For a better sense of the reduced volatility of the “Control” series, here is a YoY overlay with the headline retail sales.

Headline and Control YoY

Bottom Line: September sales showed a strong bounce after the August doldrums. Next week we’ll take a close look at Real Retail Sales after the September Consumer Price Index is released.

The SPDR S&P Retail ETF (NYSE:XRT) rose $0.05 (+0.12%) to $43.26 per share in Friday morning trading. Year-to-date, the largest retail-focused ETF with nearly $500 million in assets has gained just 0.12%.

This article is brought to you courtesy of Advisor Perspectives.