US: Redbook

Tue Nov 21 07:55:00 CST 2017

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Store Sales Y/Y change 4.1% 2.3%

Same store sales were up 4.1 percent year-on-year in the November 18 week, a strong 1.8 percentage point pickup from the prior week that takes the weekly reading to its highest level since the end of September. Month-to-date sales versus the prior month were still down 0.7 percent but the loss narrowed by 0.5 percentage points from the prior week, while full month year-on-year sales were up 3.0 percent, 0.5 percentage points stronger than last week's reading. The brisk sales pickup from the prior week by retailers in Redbook's same-store sample ends a six-week slump, hinting at a return of upward momentum going into the peak Christmas sales period and pointing to strength in ex-auto ex-gas retail sales ahead.

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.