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Consumer Spending: What We Can Learn By Going Back To School

Consumer Spending: What We Can Learn By Going Back To School by LPL Financial

Key Takeaways

  • Expectations for the back to school shopping season are low, and this season may only be flat versus last year.
  • Several consumer spending tailwinds suggest the consumer discretionary sector may be poised to outperform through year-end.

What We Can Learn By Going Back To School

The summer has flown by and some children are already going back to school this week. The back to school shopping session is considered the second most important selling season for retailers (after the Christmas/winter holidays), which we think is a good reason to check in on the health of the U.S. consumer and provide our latest thoughts on the consumer discretionary sector. Expectations for this season are low, but several consumer spending tailwinds suggest the sector may be poised to outperform over the rest of the 2015.

Back To School Retail Outlook

Our outlook for back to school shopping season (mid-July through mid-September) is not particularly strong. In fact, the National Retail Federation (NRF) forecasts that sales during this year’s back to school period may actually decline slightly this year (which we believe may be overly pessimistic) largely due to less spending on electronic devices. Broad retail sales, which increased just 1.4% year over year during the latest month (June), have been slowing [Figure 1], and suggest a relatively modest back to school season. In July, retailers’ sales growth (a subset of much broader government-reported retail sales) has been tepid, according to Thomson Reuters data (reported +0.2%). The government’s retail sales report for July is due out this Thursday (August 13, 2015).

But a survey conducted by the NRF in June indicated that a higher percentage of people expect to spend more this year (as opposed to less or the same) than last year, relative to the same survey results last year. Among college students, 29% expect to spend more this year than last, compared with 23% of responders in 2014. Among K–12, 29% expect to spend more this year than last, compared to 24% last year. The consumer is getting some help from lower gas prices, still low interest...


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