The United States economy’s growth, as measured by the retail sector, was in a state of confusion rather than direction on Friday as a week passed with strong earnings from corporates in the sector but also weak retail sales overall.
As the Federal Reserve tries to grapple with the facts to decide – and justify – whether or not to raise US interest rates in 2016, the US consumer sector is causing a headache.
On Friday, the US July retail sales tally was flat. Analysts had expected an advance. The result was to deny the S&P 500 a chance at scaling yet another record high intraday or closing level. There have been a slew is those since the start of July.
Retailer Nordstrom Inc (NYSE:JWN) closed up 8% at $51.38 after reporting quarterly profit of 67 cents per share, a whopping 11 cents above estimates. Revenue was essentially in line with forecasts, and Nordstrom raised its 2016 earnings guidance above current Street consensus forecasts.
Nordstrom shares had already jumped on Thursday in sympathy with Macy’s () after the iconic department store reported buoyant results which helped push the S&P 500 – as well as the Dow Jones and Nasdaq – to record highs.
So on Friday, even with the Nordstom results ringing good, the market was stripped of further gains as retail sales stalled.
The session was helped by J.C. Penney (NYSE:JCP). The retailer lost an adjusted 5 cents per share for its latest quarter, smaller than the 15 cent loss Wall Street was anticipating. However, revenue was slightly below forecasts, and same-store sales rose 2.2 percent compared to the consensus Thomson Reuters estimates of a 2.4% increase. Shares ended up 6.1% at $10.55.
Dillard’s Inc (NYSE:DDS) is another retailer beating estimates, with quarterly profit of 35 cents per share versus a consensus of 31 cents. Revenue was slightly above forecasts, although profit was down by more than half from a year earlier.
Dillard’s shares ended up 3.4% at $68.67.
Consumption has so often been seen as economic barometer in past business cycles. With the migration to online e-commerce things are more fragmented than ever. So is consumption telling the Fed to hike rates?
Truth is no one knows for sure. While a lot of household retailers are posting Street-beating results the aggregate numbers for the economy speak another tune.
At this stage, retailing isn’t a sure fire example of an economy overheating and central bank policymakers need to bide time.