Retail Sales Growth Could Signal More Rate Hikes

Overall, the retail sale increases matched economists’ estimates for the month of June, showing signs that interest rate hikes could be looming should the current economic activity sustain or exceed the pace of growth.

“Real consumption growth looks to have rebounded from 0.9% annualized in the first quarter to around 3% in the second, with overall GDP growth close to 4%,” said Andrew Hunter, U.S. Economist at Capital Economics. “With jobs growth strong, wage growth starting to pick up and the tax cuts still supporting disposable incomes, we expect consumer spending to continue expanding at a 2.5% to 3.0% annualized pace in the second half of this year.”

Floating Rate Fixed-Income ETFs to Benefit

Fixed-income investors can look to ETFs that invest in debt with a floating rate component–one that moves in lockstep with short-term interest rate adjustments. One such ETF to watch is the iShares Floating Rate Bond ETF (BATS: FLOT), which tracks the Bloomberg Barclays US Floating Rate Note < 5 Years Index.

The index has seen an uptrend, particularly given the Federal Reserve’s last two interest rate spikes and hints that two more could come by the end of 2018.

Retail Sales Growth Could Signal More Rate Hikes 1FLOT has already posted gains of 1.18% year-to-date, 1.90% the past year and 1.44% the last three years according to Yahoo! Finance performance numbers.

For more trends in fixed income, visit the Fixed Income Channel.