Markets

October Retail Sales Show Subdued Strength: ETFs in Focus

U.S. retail sales increased 0.3% sequentially in October, beating market expectations of a 0.2% rise. Sales recoiled from a 0.3% slump in September. Higher purchases of motor vehicles and higher gasoline prices led to the beat. Year over year, retail sales have grown 3.1% versus 4.1% in the previous month.

With this, growth worries in the United States cooled down a bit. But things are not rosy as yet. Only five of 13 major retail categories showed month-over-month increases. Consumers lowered purchases of big-ticket household items and clothing, giving signs of a moderately strong holiday shopping season.

What Leads to the Worry?

Spending at furniture stores dropped at the quickest clip since December 2018 (down 0.9% vs 0.7%), and receipts at restaurants and bars dropped the most in nearly a year (down 0.3% vs 0.8%).

Declines were also palpable at electronics and appliance stores (down 0.4% versus 0.1% gain), building material stores (down 0.5% versus down 1.8%), clothing stores ( down 1.0% versus a gain of 0.3%), hobby, musical instrument and book stores (down 0.8% versus down 0.1%), and miscellaneous store retailers (down 0.6% versus down 0.2%).

Data for September was revised down to show the so-called core retail sales (excluding automobiles, gasoline, building materials and food services) declining 0.1% instead of being unchanged as previously reported.

What Were Saviors?

Sales at health and personal care stores were unchanged, after a 0.6% increase in September. Receipts at motor vehicle & parts dealers increased 0.5% in October (versus a decline of 1.3% in September) and those at gasoline stations jumped 1.1% (versus a decline of 0.1% in September). A rebound was noticed at sales at food & beverage stores (up 0.5% versus a decline of 0.6%) and general merchandise stores (up 0.4% versus down 0.4%), while online and mail-order retail sales increased at a faster pace (up 0.9% versus up 0.2%).

Against this backdrop, below we highlight a few ETFs that may benefit from the spending pattern in the month of October.

Health & Personal Care StoresThe Obesity ETF SLIM

The underlying Solactive Obesity Index tracks the performance of global companies focusing on obesity-related diseases, weight-loss programs, weight-loss supplements and plus-sized apparel.

Online StoresAmplify Online Retail ETF IBUY

The underlying EQM Online Retail Index utilizes a rules-based methodology to select a globally diverse group of companies with 70% or more of online and virtual sales. The fund charges 65 bps in fees (read: Time to Flock to E-commerce ETFs Ahead of Holiday Season?).

Auto – First Trust NASDAQ Global Auto Index Fund CARZ

The underlying NASDAQ OMX Global Auto Index is designed to track the performance of the largest and most-liquid companies engaged in manufacturing of automobiles. The fund charges 70 bps in fees.

Food & Beverage Stores – Consumer Staples Select Sector SPDR Fund XLP

The underlying Consumer Staples Select Sector Index seeks to provide an effective representation of the consumer staples sector of the S&P 500 Index. While Beverages take about 25.2% of the fund, Food & Staples Retailing accounts for about 20.3% of the portfolio and Food Products get about 17.23% of the chunk (read: Here's Why Consumer Staples ETFs Are Rising This Year).

General Merchandise – VanEck Vectors Retail ETF RTH        

The underlying MVIS US Listed Retail 25 Index tracks the overall performance of companies involved in retail distribution, wholesalers, on-line, direct mail and TV retailers, multi-line retailers, specialty retailers and food and other staples retailers.

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VanEck Vectors Retail ETF (RTH): ETF Research Reports

Amplify Online Retail ETF (IBUY): ETF Research Reports

Consumer Staples Select Sector SPDR Fund (XLP): ETF Research Reports

First Trust NASDAQ Global Auto Index Fund (CARZ): ETF Research Reports

The Obesity ETF (SLIM): 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.

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