Retail is cooling. Not collapsing. But the heat is gone. The latest Redbook Index shows year-over-year growth of 5.2% for the week ending July 19. That’s down from 5.9% the week prior. The sample covers 9,000 stores and represents 80% of the Commerce Department’s retail data. It’s nominal. Not inflation-adjusted. So the real story is worse.
Barron’s flagged the shift. Consumers are pulling back on food, beverages, apparel, and home furnishings. Even high-income households are cutting discretionary spend. That’s not seasonal. That’s structural. Inflation is still eating margins. Price sensitivity is rising. Retailers are seeing it in basket size and foot traffic.
Tech is the outlier. Nasdaq printed an 18% gain in Q2. Microsoft and Nvidia led the charge. Forward P/E for the sector hit 22.09 in June. That’s not cheap. But it’s defensive. Investors are rotating into pricing power. Out of cyclicals. Out of energy. Out of discretionary.
Energy dropped 8.56% in Q2. Oil fell 8.91%. Demand is soft. Geopolitical risk is rising. Industrials are cutting guidance. Thirty names in steel and aluminum trimmed forecasts since April. That’s not noise. That’s contraction.
Small caps are holding. Russell 2000 gained 8.11% in Q2. Domestic demand is sticky. Operational agility matters. Utilities are flat but stable. Dividend yields are attracting capital. NextEra and Dominion are outperforming. Debt-heavy names are lagging. Rates are still a headwind.
Consumer staples are gaining ground. Procter & Gamble and Clorox are holding margins. Brand strength is the moat. Pricing power is the weapon. Volume is down. Revenue is steady. That’s the playbook.
Local voices are watching. Chicago desks say the rotation is real. Miami traders flagged the divergence between staples and discretionary. New York analysts are tracking the spread between XLP and XLY. It’s widening. That’s the signal.
Redbook’s 5.2% growth isn’t recession. But it’s not expansion either. It’s fragility. The kind that shows up before the headlines. Before the revisions. Before the layoffs.
Watch the next print. Watch the sector flows. Watch the margins. The consumer is still spending. But the game is changing.
Sources
https://tradingeconomics.com/united-states/redbook-index