The low energy prices takes a little while to trickle through to households, setting up a potential turnaround in consumer sector-related exchange traded funds ahead.
Year-to-date, the Market Vectors Retail ETF (NYSEArca: RTH) advanced 5.7% and the SPDR S&P Retail ETF (NYSEArca: XRT) increased 2.8%. Meanwhile, the Consumer Discretionary Select Sector SPDR (NYSEArca: XLY) rose 2.1% and First Trust Consumer Discretionary AlphaDEX Fund (NYSEArca: FXD) gained 4.3% so far this year. [Consumer Discretionary ETFs Could Pick Up Steam]
The consumer sectors could gain momentum as Americans get ready to let loose the pent-up demand fueled by low gas prices.
According to Visa Inc. data, an early look at last month’s consumer spending revealed that retail sales excluding automobiles and gas stations was up 4.5% in April year-over-year, reports Michelle Jamrisko for Blooomberg.
Wayne Best, Visa’s chief economist, is optimistic about the outlook as the pace of consumption has stabilized at a higher rate than last year, with Americans acquiring more goodies. For instance, purchases at electronics, appliance and furniture sores exhibited their strongest rise in three months.
“What I see in the data this month are some signs of some discretionary purchases starting to pick up,” Best said in the article. People are “starting to free up some of that savings that they’ve been enjoying in the gas-price windfall and starting to spend it.”
Additionally, consumers are also splashing more money on experiences, with hotel spending up 9.4% in April year-over-year, its fastest pace since November, and restaurant sales also at a three-month high.
The related PowerShares Dynamic Leisure and Entertainment Portfolio (NYSEArca: PEJ) increased 4.1% year-to-date. PEJ targets U.S. leisure and entertainment companies, such as resorts, hotels, cruises and restaurants, and also weights components based on price momentum, earnings momentum, quality, management action, and value. [Americans Are Dining Out, Lifting Leisure Entertainment ETF]
The Visa data provides a good overview of consumer trends for the upcoming quarter, but observers will be waiting on the more widely anticipated official retail sales figures for April on May 13.
Market Vectors Retail ETF
For more information on the consumer sector, visit our consumer discretionary 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.