Consumption. It’s what drives the American economy. Retail trends are likely to recover but at a more slower pace, and exchange traded funds (ETFs) could be one way to trace the recovery of consumer habits and retail.
Recent retail trends are likely to continue for awhile. That is, at least, until unemployment drops and household income goes up again, remarks R. Mark Rogers for Econoday. Consumption makes up roughly two-thirds of the economy and retail sales account for about 40% of consumer spending.
In Econoday’s report for June, retail sales increased 0.6% after a 0.5% rebound in May. The increase was led by higher auto and gasoline station sales. Overall, retail sales diminished 9.1% for the recession ending in June from December of 2007.
Rogers provides more specific economic data for areas within the retail sector during the recession, which include:
- Largest declines were in gasoline and autos. Service station sales dropped a cumulative 25.7% and autos dropped 24%.
- Clothing and accessories shrunk by 5.9%. Men’s apparel fell 12.9% and women’s apparel fell 10.7%. Shoe sales diminished 6% while jewelry sales receded 3.4%.
- Food & beverage sales grew 2.4% while food services & drinking places gained 2.2%. Real sales actually fell since CPI for food at home increased 4.6% and CPI for food away from home increased 6.1%.
- Diminishing home sales has resulted in a 17.1% plunge in new furniture and furnishing sales. Building materials and gardening equipment & supplies contracted 11.9%.
- During the latter part of 2008 and early 2009, electronics and appliances sales fell 11.2%.
- Health & personal care experienced a 5.4% boost.
- Sporting goods, books stores & music stores saw sales fall 1.2%.
- General merchandise stores only dipped 0.6%. Department store sales plunged 10.8%. Warehouse clubs and superstores gained 4.9%.
From the bullet points above, it seems pretty clear that many consumers are still sticking to the necessities, while some are making the odd foray into a splurge item. Even then, consumers still want values and bargains.
- SPDR S&P Retail (XRT): up 41.6% year-to-date
- Consumer Staples Select Sector SPDR (XLP): up 3.1% year-to-date
For more information on retail, visit our retail category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.