Finally Some Good News In The Retail Industry

by Trefis Team
American Eagle Outfitters
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Consumer sentiment is on the rise heading into the holiday season, a sign that bodes well for the plagued retail industry. According to the University of Michigan Surveys of Consumers, the sentiment surged in early October, to a level not seen since the start of 2004. The index of consumer sentiment soared to 101.1 in October, from 95.1 in September, and 87.2 back in October of last year. This improvement occurred across all age and income groups. The strong outlook for consumer spending is expected to last till at least mid-2018, making this the second longest expansion since the mid-1800’s. Furthermore, retail sales posted the strongest month-on-month improvement since March 2015. These positives brought some cheer to the retail stocks, particularly of department stores and apparel chains.

Indication Of Future Optimism

Advance estimates of retail and food service sales for September 2017 in the US were $483.9 billion, reflecting a 1.6% growth over the previous month and 4.4% rise as compared to September 2016. The total sales for the July to September quarter were up 3.9% over the corresponding period last year.

Meanwhile, the measure of current economic conditions escalated to 116.4, reflecting a 4.2% month-on-month growth and a 12.8% year-on-year change. Moreover, the index of consumer expectations surged to 91.3, an 8.2% month-on-month and 18.9% year-on-year growth. According to Richard Curtin, chief economist at the University of Michigan, this data reflects a greater optimism of the future course of the economy. However, at the same time, “it also reflects an unmistakable sense among consumers that economic prospects are now about as good as could be expected.” Such an outlook is reinforced by a moderation in the anticipated rate of growth of personal finances as well as the overall economy. While such an outlook typically indicates a slowdown in the economy, this is not the case. Consumers, in fact, expect low unemployment, low inflation, modest increases in the interest rate, and small gains inĀ  incomes.

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