The December retail sales report was a disaster, notes Landon Whaley, who recommends shorting the SP...
Retail sales tomorrow (for October) will tell us how strong the holiday shopping season will be
11/14/2011 3:20 pm EST
How about the October retail sales that get announced tomorrow, Tuesday, November 15, before the New York market opens?
The big pop in September retail sales—up 1.1% from August—was a major factor contributing to optimism about U.S. economic growth. Not only have the projected odds of a U.S. double-dip recession in the next 12 months dropped back to 25% in the November Wall Street Journal poll of 52 private sector economists from 33% in the September survey. But also there’s a growing suspicion that U.S. economic growth in the fourth quarter will hold above 2%. The Blue Chip Economic Indicators poll of economists, for example, most recently projected 2.3% growth.
That would be down from the 2.5% growth in the third quarter, but way above the 1.3% in the second quarter and certainly nothing like the double-dip recession so feared in August and September.
The likelihood is that tomorrow’s retail sales numbers won’t be as strong as September—which got a boost from back to school shopping—but should still show solid growth heading into the holiday shopping season. Economists surveyed by Briefing.com were projecting 0.4% growth for October.
I think that has a good chance of being a little light—0.6% might be more like it—but the October numbers should be down from September on the lack of a back to school boost for October and on a likely slowing of the big jump in car sales (to a 13.1 million annual sales rate in September from 12.1 million in August.)
Anything over 0.4%, in my opinion, will keep the optimism going for holiday season sales.
If you own a retail stock that’s pushing your target price—as Coach (COH) is doing in my Jubak’s Picks portfolio http://jubakpicks.com/ --I’d hold onto it until you’ve had a look at these numbers and can get a better sense of how strong this sector will be as we head into the end of the year shopping season.
Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund http://jubakfund.com/ , may or may not now own positions in any stock mentioned in this post. The fund did own shares of Coach as of the end of September. For a full list of the stocks in the fund as of the end of September see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/
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