Consumer discretionary ETFs may find support from strong consumer confidence and a tight labor market that helped fuel Americans’ spending in the third quarter.
According to the Commerce Department, retail sales – a measure of spending at U.S. stores, websites and restaurants – rose 0.5% in July month-over-month, compared to economists’ forecasts for a 0.1% gain, the Wall Street Journal reports.
The growth in retail sales was driven by improved spending at grocery stores, restaurants, department stores and clothing stores.
Looking at consumer sector ETFs, the PowerShares Dynamic Food & Beverage Portfolio (NYSEArca: PBJ), which targets food and beverage companies, dipped 1.5% year-to-date. Meanwhile, the PowerShares Dynamic Leisure and Entertainment Portfolio (NYSEArca: PEJ), which includes restaurant names, rose 4.0%; the SPDR S&P Retail ETF (NYSEArca: XRT), which targets brick-and-mortar retailers, increased 15.5% and the broader Consumer Discretionary Select Sector SPDR (NYSEArca: XLY) advanced 15.4%.
“Restaurants are a highly discretionary category, and continued strength suggests that households are not too worried about higher gas prices and that tax cuts are providing a cushion,” Morgan Stanley economists said in a note.