January 2012 Retail Sales Increase 0.4% After Flat Holiday Spending in December

02/15/2012
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In the month of January 2012 consumers spent more money on electronics, sporting goods, and home & garden supplies at department and small and large format general merchandise stores.  Data also showed that consumers spent more at restaurants and bars.  The retail sales report is the first economic indicator that investors get to see each month when it comes to consumer confidence and consumer spending.  Overall, consumer spending represents about 70% of all United States economic activity.

The government reported that retail sales moved higher by 0.4% after a flat holiday spending season.  The higher sales number suggests that the increase in hiring has caused a positive mindset in many American households.  This, in turn, increased the amount of money spent.  The unemployment rate has been on a steady decline over the last several months and many retailers are seeing more opportunities to increase jobs with record profits.

The Retail Sales Graph shows that the economy has gradually improved since March of 2009.  Interestingly, this is the exact same month that the S&P 500, NASDAQ and Dow Jones Industrial Average hit their decade low.  Recently the NASDAQ closed slightly above 2930 which is the highest level since the Tech Bubble all the way back in 2000 and 2001.  This is a very good sign for investors as new highs often increase consumer confidence which, in turn, “could” increase consumer spending.

Market and retail psychology is very interesting in that customers tend to spend more when they feel that the economy is recovering or in very good shape.  Even though the unemployment rate is in the double digits in some states consumers are seeing a slight increase in home prices.  When a home price is increasing some feel they have a strong reason to believe the economy is moving in the right direction.  This is not always the case as a double dip recession is a possibility.

Over the past several weeks many analysts felt as if the very slight increase in wages would cause customers to reduce overall spending.  The pace of inflation has been higher than the increase in wages which means that consumers might have to dip into savings or other areas to have money to spend.  Even though this is the case, the retail sales report shows that consumers are still increasing their spending at the same pace as last year.

Since the beginning of the year the NASDAQ is up 11.93% while the S&P 500 is up 6.81%.  This should come as no surprise as consumers continue to spend more on electronics.  The advancements in technology have pushed some consumers to upgrade to tablet devices and smartphones.  In a recent earnings report, Apple stated that the company sold 15.4 million iPad tablets for the quarter.  This industry has become very competitive with the Amazon Kindle Fire and many other Android tablet devices available.  Even with great competition Apple continues to report very impressive growth numbers.

For 2012, analysts have predicted that Amazon.com will sell almost 15 million Kindle Fire units.  This upward revision from 12.7 million includes the new 7 and 9 inch models that are going to be available sometime in 2012.  All of these tablets, eReaders and smartphones being sold means that Americans are spending money on discretionary items.  Americans consumers do not consider a tablet, eReader or smartphone a staple as they are not a necessary part of survival.  Some younger generation Americans may make an argument but it is possible to survive without these items unlike food and water.

As popular February Presidents Day Sales roll out retailers are looking to keep the momentum going.  After seeing great sales numbers in the month of February several retail stocks have hit all time highs.  Some of these companies include Dollar Tree, Tractor Supply Company, Lululemon Athletica, Ulta Beauty & Salon and AutoZone.  Analysts have made it a habit of revising earnings for these companies as they are seeing impressive growth.

The February 2012 retail sales report will be available in the middle of March.  Both investors and consumers will be interested to see if sales reach an all time high above $402 billion.  The report will be available at the Census.gov website.  The government website also provides past retail sales numbers which could help analysts find trends and make predictions.

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