CMI Data: Good News For Consumer Staples ETFs?

September 03, 2009

CMI figures could pose good news for consumer staples exchange-traded fund investors.


After six-months of strong gains, the Credit Managers’ Index slowed dramatically in August, although it still managed to climb towards a key benchmark score that indicates the economy is growing.

Retail sector exchange-traded funds could be the most vulnerable to the data if it does not dramatically improve. In particular, the iShares S&P Global Consumer Discretionary Sector Index Fund (NYSEArca: RXI) and the Claymore/Robb Report Global Luxury ETF (NYSEArca: ROB) have been considerably weak performers so far in September.

CMI is an index created by surveying National Association of Credit Management members who are business owners about favorable and unfavorable factors in their monthly business cycle.

The benchmark is regarded as a proxy for the health of the economy, with a score of over-50 signaling expansion, and a score of under-50 signaling economic contraction.

The CMI score for August was up 0.3 of a percentage point to 48.3, roughly the same as it was a year ago.

“It is mildly encouraging to note that the index has not fallen, but an anemic 0.3 gain was much less than had been anticipated,” said Chris Kuehl, an economist for NACM, in a statement.

Some of the slow gains were a result of weaker new credit applications by manufacturers. The score for the manufacturing sector remained almost flat, at 48.3, but the new credit applications score plummeted to 48.6 vs. a bullish 55.3 in July.

Among companies in the service sector, the index crept marginally higher, to 48.1 from 47.7 in July.

One ETF which may hold up better in a scenario of sluggish growth is the Consumer Staples Select Sector SPDR Fund (NYSEArca: XLP), which is invested in companies more resilient to weak economic confidence. More than 35% of the fund’s holdings comprise Proctor & Gamble, Wal-Mart Stores and Philip Morris International.

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