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Consumer Spending Rises Again in July: ETFs in Focus

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Consumer spending, which accounts for 70% of the economy, rose by 0.4% in July, pointing toward a steady flow of income within the economy. This is the sixth straight month of healthy gains ( see all the Consumer Discretionary ETFs ).

The U.S. market has been on the rise thanks to a slew of upbeat economic data - GDP grew at 4.1% annual rate (the best clip in nearly four years) in Q2. The Fed is likely to keep moving toward a tightened monetary policy with at least a couple of rate hikes expected in remaining part of the year. Jerome Powell intends to gradually go about the process so that inflation doesn't go out of hand even though President Trump is not too pleased with the rate hikes.

There was heightened amount of spending in food services, accommodations and prescription drugs. Advances in restaurant receipts were a major highlight in the previously released figures. Income advanced by 0.4% for the second successive month. Disposable income advanced 0.2%. Personal savings rate fell to 6.7% of after-tax income in July, below the June level of 6.8% (read: Wave of Solid Q2 Results Boosts Retail ETFs ).

Inflation surpassed the Fed's 2% target by reaching 2.3% for the 12 months ending July, the swiftest year-over-year increase since 2012. The central bank is willing to accommodate a slightly higher inflation as the inflation was limited in the past six years. Fed's preferred inflation parameter related to consumption rose by 0.1% from the previous month. Prices excluding food and energy rose 0.2% from June. Inflation-adjusted spending rose 0.2% from the previous month, the slowest pace since a decline in February. Adjusted for inflation, durable goods spending fell 0.5%, marking the first decline since February, and non-durable goods spending rose 0.6%. Household expenditure on services rose by 0.2%, following a 0.4% increase in June (read: ETFs Buoy on Booming Q2 Corporate Profits: 5 Best Charts ).

Unemployment rate has reached its lowest level in 18 years. Per a report by the Labor Department, citizens applying for unemployment benefits rose by 3000 in the week ended Aug 24 but are still within the low-level of 213000, indicating the strength in the job market. The four-week average for claims reached its lowest point in nearly 49 years .

In the light of steady increase in spending, the following consumer discretionary ETFs are worth focusing on:

Consumer Discretionary Select Sector SPDR FundXLY

It tracks the Consumer Discretionary Select Sector Index. There are 80 holdings in the basket and Amazon.com AMZN holds the top spot with 25.47% weight. It has AUM of $15.72 billion and the expense ratio is 0.13%. The fund has earned 4.5% return over the past month. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.

Vanguard Consumer Discretionary ETFVCR

It tracks the MSCI US Investable Market Consumer Discretionary 25/50 Index. There are 371 holdings in the pool of fund and is heavily skewed toward the top 10 holdings (50.3%). It has AUM of $3.21 billion and the expense ratio charged is 0.10%. The fund has returned 3.9% over the past month. It has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

iShares US Consumer Services ETFIYC

It tracks the Dow Jones U.S. Consumer Services Index. The fund comprises 160 holdings and is heavily skewed toward the stock of Amazon.com (21.85%). AUM is $964.5 million and expense ratio is 0.44%. The fund is returned 5.1% over the past month. It has a Zacks ETF Rank #2 with a Medium risk outlook.

SPDR S&P Retail ETFXRT

This fund tracks the S&P Retail Select Industry Index. It is an equal-weighted index with 89 holdings. The fund is heavy on apparel retail with 23.4% allocation. It has AUM of $724.1 million and expense ratio of 0.35%. The fund has 3.7% returns over the past month. It has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.

Fidelity MSCI Consumer Discretionary Index ETFFDIS

It tracks the MSCI USA IMI Consumer Discretionary Index. There are 341 holdings in the basket. Amazon.com is the top holding with a 20.85% allocation. It has an AUM of $679.2 million and the expense ratio is 0.08%. %. The fund has 4.1% returns over the past month. It has a Zacks ETF Rank of #2 with a Medium risk outlook.

Amplify Online Retail ETFIBUY

It tracks the EQM Online Retail Index. There are 39 securities in the pool of fund. It has AUM of $548.5 and expense ratio of 0.65%. The fund has returned 4.7% over the past month.

First Trust Consumer Discretionary AlphaDEX FundFXD

It tracks the StrataQuant Consumer Discretionary Index. It is an equally weighted index with 109 holdings. AUM is $424.5 million and the expense ratio charged is 0.63%. The fund has earned 3.1% return over the past month. It has a Zacks ETF Rank of #2 with a Medium risk outlook.

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Amazon.com, Inc. (AMZN): Free Stock Analysis Report

AMPL-ONLN RETL (IBUY): ETF Research Reports

FT-CONSUMR DIS (FXD): ETF Research Reports

SPDR-SP RET ETF (XRT): ETF Research Reports

VIPERS-CONS DIS (VCR): ETF Research Reports

ISHARS-US CN CY (IYC): ETF Research Reports

SPDR-CONS DISCR (XLY): ETF Research Reports

FID-CON DIS (FDIS): ETF Research Reports

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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