Those results alone might be reason enough to expect continued performance from retailers, but further indicators like University of Michigan’s survey of consumers and monthly retail sales figures also shows a confident American shopper. The university’s monthly questionnaire of U.S. consumers’ perspective on their economic well-being has shown a steady uptick to its highest level since 2008, while September retail sales data remained on an uptrend for the seventh straight month in a row at 0.4 percent growth.
However, within those figures are other, more ominous signals that traders may do well to consider when weighing their strategy this winter. While still strong, sales figures are also contending with rising relative prices, rising inflation and those rising interest rates mentioned earlier in addition to persistently anemic wage growth. And, while the UM survey is an inherently subjective measure of consumers’ sense of their own financial wellbeing, the fact that it’s sitting just above where it was before the 2008 crash could make some investors a little anxious.
So, where does this leave us now?
Q3 retail earnings are a mixed bag, as Macy’s, Nordstrom and Dillard’s have all been punished heavily for their reports. It’s clear that the market is feeling a little jumpy, but it will really come down to where the U.S. consumer stands. There’s an argument to be made that the survey is a stronger indication of how much shoppers might be willing to spend than historical figures, particularly in the case of those who might be primed to shop for this holiday season, which is anticipated to break a 7-year sales record.
But there’s also a case to be made the other way. Since late 2017, and arguably since the 2016 election, the market has been relying on tax cuts and deregulation to spur income growth and carry productivity past some costly trade wars. If the trickle-down in the cuts have plateaued, and workers don’t have the cash to throw around that some in the market are expecting, it might just be a longer, colder winter for retail.
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