As the holiday shopping season goes into full swing, Americans have been limited by wage growth and only spend within their means, potentially subduing the outlook for consumer sector-related exchange traded funds.
Over the past month, the Consumer Discretionary Select Sector SPDR (NYSEArca: XLY) has increased 7.0% while the SPDR S&P Retail ETF (NYSEArca: XRT) rose 9.1%.
According to the Commerce Department, expenditures was up 0.2% last month, rising at the same pace as income, reports Victoria Stilwell for Bloomberg.
Consequently, some observers are concerned that low wage growth could put a limit on consumer spending in the last three months of the year.
The spending figures “pose a slightly softer starting point to the quarter,” Jacob Oubina, a senior U.S. economist at RBC Capital Markets LLC, said in the article. Oubina also pointed out that concerns may be short-term as “consumers are on the best footing” due to confidence, job growth, household balance sheets and savings. [Cheap Fuel Invigorates Consumer, Retail ETFs]
Nevertheless, the positives are being slightly tempered by the negatives. For instance, recent economic data shows that more Americans filed for unemployment benefits last week and demand for capital goods unexpectedly dipped over October for the second month.
“The macro environment heading into the heart of the shopping season feels much like last year — an improving economy, but still a somewhat reluctant shopper,” Chief Kirkland’s Operating Officer Michael Madden said in the article. “On balance, with stronger economic growth, lower energy prices and a slightly better job market, this holiday season has more going in its favor.”