Retail trade figures from the Australian Bureau of Statistics shows sales have jumped 0.8% in September, a sign life is returning to the sector. The increased trade follows on from a rise of 0.5% in August and 0.1% in July.
In addition, interest rate cuts have prompted businesses to expect stronger sales early in 2014. According to the latest Dun & Bradstreet business expectations survey, 36% of companies are expecting earnings increases in the first quarter of 2014.
Dun & Bradstreet's profit index rose to a 10-year high of 34.9 points, up from 21.1 points in the previous quarter. CEO Gareth Jones believes the effects of low interest rates have already affected stocks and the property market but businesses are next: "We've recently seen the effect of rate cuts on consumer confidence levels through a rebounding property and share market, and it now appears we're seeing that same positive impact finally filter through to the business sector."
"The sales expectations index for the first quarter of the New Year has risen 13.9 points, its highest level in 12 months, with 16 per cent of businesses anticipating increased activity while just 2 per cent expect weaker trade," the survey said.
Foolish takeaway
Just like the rush on dividend yield earlier this year, savvy investors should be positioning themselves to take advantage of the monetary easing cycle. Four stocks I believe are reasonably priced, pay good dividends and will benefit from increased activity are Myer (ASX: MYR), RCG Corporation (ASX: RCG), The Reject Shop (ASX: TRS) and Super Retail Group (ASX: SUL).
We've already seen strong results from Harvey Norman (ASX: HVN) and David Jones (ASX: DJS) but they're only likely to improve with a continued low interest rate environment. I'm anticipating interest rates to remain low for at least 12 months and, if I'm correct, retail sales will continue to lift because of increased confidence and spending in the economy.