US: Redbook

Tue Sep 26 07:55:00 CDT 2017

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Store Sales Y/Y change 4.0% 3.6%

Same store sales were up 4.0 percent year-on-year in the September 23 week, picking up the pace by 0.4 percentage points after the prior week's sharper deceleration. Month-to-date sales versus the prior month were flat, while year-on-year full month sales were up 4.1 percent, unchanged from the prior week's reading. The week's uptick back up to 4.0 percent year-on-year growth, a level of strength not seen in over two years before being breached in late August, suggests that the negative impact of Hurricanes Harvey and Irma on sales at retailers in Redbook's sample may be less severe than some anticipated, and indicates strong ex-auto and ex-gas retail sales for September.

A weekly measure of comparable store sales at chain stores, discounters, and department stores. Redbook tracks week-to-week change, month-to-date change, and year-on-year change with the latter the most closely watched reading. The report offers early indications on ex-auto ex-gas retail sales.

Consumer spending accounts for two-thirds of the economy, so if you know what consumers are up to, you'll have a pretty good handle on where the economy is headed. Needless to say, that's a big advantage for investors.

The pattern in consumer spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth. This balance was achieved through much of the nineties. For this reason alone, investors in the stock and bond markets enjoyed huge gains during the bull market of the 1990s. Spending at major retail chains did slow down in tandem with the equity market in 2000 and during the 2001 recession. Sales weakened again in 2008 due to the credit crunch and recession.

The Redbook is one of the more timely indicators of consumer spending, since it is reported every week. It gets extra attention around the holiday season when retailers make most of their profits. It is also a useful indicator when special factors can cause economic activity to momentarily slide. For instance, it was widely watched in the aftermath of Hurricanes Katrina and Rita which hit New Orleans and the Gulf Coast in 2005 and again when Hurricanes Irene and Sandy hit the East Coast in 2011 and 2012.