Despite an expanding economy and healthier employment numbers, consumers are spending less, with retail sales slowly losing steam, pressuring sector-related exchange traded funds.
Year-to-date, the SPDR S&P Retail ETF (NYSEArca: XRT) has dipped 3.0% and Market Vectors Retail ETF (NYSEArca: RTH) is down 1.7%. In comparison, the S&P 500 index is up 5.9% so far this year.
According to the Commerce Department, U.S. retail sales stalled in July, up a lower-than-expected 0.1% excluding auto sales from June, the weakest result since January when the winter storms kept shoppers at home, the Wall Street Journal reports. In comparison, economists expected sales to rise 0.4% excluding autos.
The retail ETFs have a small position in auto retailers. For instance, XRT includes a 14.0% position in automotive retail but holds a larger position in apparel 24.7% and specialty stores 16.4%.
“Since a short-lived rebound in sales in February and March, the consumer has continuously slowed consumption,” Sterne Agee chief economist Lindsey Piegza said in the article.
Retail sales growth have slowed every month of the second quarter, and Jay Morelock from FTN Financial expects the weakness to carry over into the third quarter. [Retail ETFs Try to Rebound]
“This does not bode well for a sustained rebound from weak GDP growth in the first half of the year,” Morelock said in a separate WSJ article.