While the U.S. economy continues to chug along, there were signs of weakening growth in the second quarter. The Commerce Department reported that June retail sales increased 0.4%, not quite the 0.8% average growth estimated by 82 economists surveyed by Bloomberg.
Demand did not change much from May, and the recent data reported lead to a downward revision of May’s retail sales, from 0.6% to 0.5%. Consumer spending, which accounts for almost three-fourths of the economy, grew 1.5% in the second quarter versus a spending forecast of 1.7% by economists at Morgan Stanley. There are market expectations that the remainder of the year should have moderate increases after this very weak second quarter.
Yet despite the apparent signs of weakening, there are sectors where consumers are spending their money. June’s retail data point to higher sales at automakers and specialty retailers. Purchases of big-ticket items like cars are aided by the recent rallies in the stock market and rising home prices. Gains at specialty retailers reflect specific consumer spending trends, such as greater spending on home-related goods due to the improving housing market and budget-conscious consumers shopping at dollar stores.
The two automakers and two specialty retailers below could be buying opportunities. Let’s take a closer look.
For the first six months of 2013, General Motors Company (NYSE:GM)’ sales increased nearly 4% over the same period last year. Overall, the company posted sales of 4.85 million cars during the first half of the year. The Chevrolet brand sold 2.5 million vehicles, up 1.4% over last year. The release of new models in the U.S. and overseas carried the latest quarter, where Chevy achieved its eleventh straight quarter of higher sales.
The company’s estimated average EPS for 2013 is $3.30 and is estimated to increase to $4.36 in 2014. General Motors Company (NYSE:GM) shares currently trade at a cheap eight times 2014 earnings, a fair price for a company with an estimated 5-year annual growth rate of 15%.
Ford Motor Company (NYSE:F) is another car company benefiting from consumers upgrading their cars. The company had its best June since 2006, with a 13% increase over last year. Ken Czubay, Ford Motor Company (NYSE:F)’s Marketing VP, noted that the company had strong demand across its entire lineup. Small car unit sales totaled 35,851, up 39% over last year; this was also the segment’s best performance in 13 years.