Some minor stabilization crept in at the end of Monday’s session but there’s no incentiv...
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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