If American consumers are looking up and global manufacturers are looking up, too, that’s great news for many segments of the market.
A recent data dump suggests that’s just the picture investors are looking at right now.
Consumer discretionary stocks just pulled off a great rally in November, with the sector tallying the best performance in the S&P 500.
Only five of the S&P’s 10 core sectors were in the green, and looking at the SPDR ETFs for each sector shows how dramatically these stocks pulled away. The Consumer Discretionary Select Sector SPDR (NYSE:XLY) notched almost 3.2% gains, with the next best gain about 1.9% for Materials Select Sector SPDR (NYSE:XLB). Individual XLY components were up even more, with 6% gains for Home Depot (NYSE:HD) and Amazon.com (NASDAQ:AMZN) up more than 8%.
Furthermore, consumer confidence as measured by the Conference Board hit a four-year high in November. The reading of 73.7 is the highest since 76.4 in February 2008.
You can understand why consumers have some swagger back when looking at the two biggest price gauges shoppers care about: housing and gas prices.
The latest data through the end of September shows property values in major metro areas tallied the largest 12-month increase since the 12 months ending in July 2010, according to data from S&P/Case-Shiller. Prices marked the sixth straight month of increases in September.
Meanwhile, gasoline prices are at a six-month low, with South Carolina breaking below the $3 mark.
Not everything is peachy, of course. Retail sales were up a weak 1.6% in November, but the big shortfall is largely (and rightly) blamed on the effects of Superstorm Sandy ruining the environment for both retailers and consumers alike. Not all those lost sales will be recouped, but riding confidence is a good sign that the spending won’t be wholly washed away.
A recent glut of purchasing mangers’ index, or PMI, reports show some encouraging signs from some of the most discouraging regions of the word.
China’s “official” PMI for November tallied 50.6 — just short of expectations but still in growth mode since anything more than 50 is expansion — up from 50.2 in October. Also, the HSBC Manufacturing PMI was in growth mode, hitting a 13-month high.
In India, HSBC’s PMI figures marked an amazing 44 consecutive months of expansion and the fastest rate of growth in five months.
But perhaps most encouraging, a lot of the eurozone’s members saw their numbers improve. This, from Business Insider and the tireless tallying of Sam Ro and Joe Weisenthal:
- Spain: Markit Manufacturing PMI — 45.3, up from 43.5 in October
- Italy: Markit/ADACI Manufacturing PMI — 45.1, down from 45.3 in October
- France: Markit Manufacturing PMI — 44.5, up from 43.7 in October
- Germany: Markit/BME Manufacturing PMI — 46.8, up from 46.0 in October
- Greece: Markit Manufacturing PMI — 41.8, up from 41.0 in October
- UK: Markit / CIPS Manufacturing PMI — 49.1, up from 47.5 in October
- Overall: Eurozone Manufacturing PMI — 46.8, up from 45.7 in October
Clearly there’s still trouble since growth remains elusive, but the numbers are edging higher across the board in Europe. An industrial recovery is necessary to pull the content out of recession, so this is a good sign.
Of course, we have plenty of other issues. Corporate earnings are in the crapper, the fiscal cliff looms large in hype even if not in substance and the persistently high jobless rate remains … well, persistently high.
But there are signs of life on both the consumer and the manufacturing front. That’s good news for the fourth quarter, and perhaps for 2013 as a whole, too.
- Sam Ro and Joe Weisenthal deserve another mention for their exhaustive PMI all-nighter. Check out all the details. (Business Insider)
- Of course, manufacturing in the U.S. likely cooled in November, according to ISM reports … but blame that on Sandy, too. (Businessweek)
- John Mauldin mulls a rebound in U.S. manufacturing. (Moneyshow)
- My previous data dump on why consumers are back, and a recent radio spot on the same topic. (The Slant)
Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.