April Macro Indicators Bring Hope for Department Stores (Part 5 of 5)
Michigan consumer sentiment index
The final reading for April 2015’s consumer sentiment index, released on May 1, came in at 95.9, marking the second-highest level since 2007. The consumer sentiment index, prepared by the University of Michigan and Thomson Reuters, was up 3.1% from 93 in March 2015. And, compared to 84.1 in April 2014, the index increased by 14%.
The Michigan–Reuters CSI (consumer sentiment index) reached an 11-year high of 98.1 in January 2015. Consumer optimism can be attributed to improvement in the job market as well as continued low inflation and low interest rates.
An upbeat consumer sentiment report is a positive indicator for department stores including Nordstrom (JWN), JCPenney (JCP), Macy’s (M), and Kohl’s Corporation (KSS). Consumer optimism may lead to higher spending on discretionary items like apparel and accessories, footwear, and home furnishings.
Macy’s, the largest department store in the US, makes up ~1% of the Consumer Discretionary Select Sector SPDR Fund (XLY) and 0.1% of the SPDR S&P 500 ETF (SPY).
Consumer confidence index down in April
The CCI (consumer confidence index) is based on a monthly survey conducted by Nielsen for the Conference Board. The latest release on April 28, 2015, indicates a decline in the CCI index in April to 95.2, down from 101.4 in March 2015.
The decline in April is attributed to the “lackluster performance of the labor market” and concerns about the short-term outlook. The proportion of consumers expecting improvement in business conditions over the next six months fell to 16%, down from 16.8% in March. Meanwhile, those expecting business conditions to worsen increased to 9.4%, up from 8.1% in March.
The CCI relies on opinions about current conditions as well as expectations related to future conditions. It’s generally more volatile than the CSI. Consumer confidence in the economy is reflected in the level of consumer spending, which accounts for over two-thirds of GDP (gross domestic product).
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