5 Stocks To Gain From Blockbuster Retail Sales Report

Sales from U.S. retailers ramped up the most in five months in October, primarily on higher purchases of building materials, motor vehicles and fuel. Strength in this metric bodes well for the Christmas shopping season, in which sales are predicted to surpass nearly $1 trillion.  

Consumer spending, which reflects nearly two-thirds of U.S. economic activity, grew at its best pace in almost four years in the third quarter. Of late, American consumers are on a spending spree, courtesy of a healthy workforce market scenario and tax cuts provided by the Trump administration.

Against this backdrop, it seems sensible to invest in retailing stocks that are likely to make the most of the bullish sentiments.

What do the Numbers Exhibit? 

Per the Commerce Department — U.S. retail sales secured a monthly gain of 0.8% in October and came in 4.6% higher than the year-ago tally. The so-called core retail sales that exclude food services, auto dealers, building materials stores and gasoline stations rose 0.3% in the past month.

Sales at the automobile parts and dealers rose 1.1%, its highest since March. Higher gasoline prices pushed up the receipts in filling-stations by 3.5% month over month. Building-material stores’ sales grew 1%, probably on the back of rebuilding efforts in the hurricane-devastated areas. The electronic and appliance stores recorded a monthly sales gain of 0.7%. Sporting goods, hobby, musical instruments and books; clothing; and general merchandise categories, each recorded 0.5% gain in October. 

Consumer activities at the restaurants and home furnishing stores had slightly weakened in the past month, possibly due to the impact of hurricane Florence and Michael. Nonetheless, the adverse fallout trends are likely temporary.

Factors Driving Spending Spree  

Blockbuster retail sales in October came on the back of upbeat consumer sentiment. U.S. consumption spending is gaining momentum on the back of increased employment opportunities and higher wage rates. The economy added 250,000 new jobs as joblessness dip to a 48-year low in the past month. Notably, wage rate growth touched 3% in the past 12-month period, for the first time since the end of the Great Recession. On Nov 15, a separate Labor Department report revealed that initial jobless claims in October neared its lowest level since 1969, indicating a healthy labor market going forward.

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