United States chain stores saw the second quarter end with the slowest retail sales growth recorded in over one year according to an ICSC-Goldman Sachs survey. This report by the investment banking firm and the ICSC (International Council of Shopping Centers) is a weekly report known as the “Johnson Redbook Retail Sales Index.”
This year sales for the week ending June 30th, same-store sales at retail chain stores only grew 1.7 percent, compared to 2.3 percent for the same period last year. Sales for the period did not meet plan. Redbook explains that the retail calendar may be partially responsible as last year the July 4th weekend was on a weekend and this year will be mid-week, on a Wednesday. Also blamed for the soft growth was weather, two thirds of the country were suffering from a major heat wave, wildfires and storms also may have impacted retail shopping.
The four week average recorded a gain of 2.2 percent as well; the lowest recorded since April of 2011.
Nevertheless, Redbook indicates that these results are consistent with the 0.2 percent increase recorded in May, 2012. Redbook also sees July sales falling about 4 percent from June levels as July is typically a slower shopping month marked by clearance sales as stores push out summer inventory to make way for fall lines.
Investors value this weekly index as an indicator of retail strength within the economy. As the US economy is driven by consumer spending; which accounts for more than 65 percent of the economy, investors are keen to know what consumers are doing as a way to predict coming economic activity. This is advantageous to determining how stocks and bonds will perform. Stocks react by increasing in price when sales are good – this is interpreted as increasing profitability for retail chains. Bonds are sensitive to too much growth as an indicator of inflation.
However, the Redbook has some disadvantages and is not as accurate as the ICSC weekly index for retail sales. One reason is that it only covers about 10 percent of retail in the United States. Another is that the index is computed using the entire preceding month as the basis for comparison for each week of the month. Thus, first week Redbook retail sales for June are compared to all of May, as is the second, third and fourth. Analysts feel the index would be more useful if it was calculated using year over year data.