What Are Core Retail Sales?
Core retail sales refer to aggregate retail sales in the U.S., excluding automobile and gasoline sales, which are excluded due to their volatility. Core retail sales figures are released monthly by the U.S. Department of Commerce about two weeks after the end of the reference month. As consumer spending accounts for more than two-thirds of the U.S. economy, the core retail sales data is an important indicator of the health of the overall economy.
Understanding Core Retail Sales
Core retail sales data is used extensively by various government bureaus to calculate GDP, develop consumer price indexes, and analyze current economic activity, while the Federal Reserve uses the numbers to assess recent trends in consumer purchases. Retail sales make up nearly one-half of personal consumption, which in turn accounts for nearly 70% of GDP. Retail sales, in terms of direct economic activity, accounts for almost one-third of GDP.
Different countries and their statistics bureaus compile retail sales data differently.
The percentage increases or decreases also give a good indication of how fast the economy is contracting or expanding. Very strong or weak retail sales can also put upward or downward pressure on prices. As retail sales surge, upward pressure on prices may eventually take hold, especially if sales figures continue rising month after month. The same is true when sales are very weak, putting downward pressure on prices as consumers spend less, again when sales drop for a prolonged period.
Some countries have private companies handle some data while various government offices handle others. In the U.S., retail sales data is compiled and released by the U.S. Census Bureau. This data measures total retail spending in stores and receipts across the nation and its monthly rates of change expressed as a percentage. This data covers sales for durable and non-durable goods ranging from food to autos at a retail level.
Retail Sales Data vs. Core Retail Sales Data
The difference between the U.S. retail sales numbers and U.S. core retail sales data is that core retail sales excludes autos and gasoline. Auto and gasoline components are excluded because they are often very volatile in price fluctuations.
The Census Bureau releases retail sales data for both month-over-month (MoM) and year-over-year (YoY) percentage changes. MoM data is the more important of the two as this data series is more likely to show a surprise or unexpected reading; markets are also more likely to react to deviations from expectations in these numbers. However, core retail sales data is released as month-to-month changes only.
- Core retail sales are a strong indicator of economic health and whether the economy is contracting or expanding.
- Core retail sales are made of up non-durable and durable goods from industries like food and beverage to electronics.
- Sales figures for the fourth quarter (October-December) are often high given the holiday shopping season.
Data is also collected for a Retail Sales Control Group MoM change. This group excludes autos, gasoline and construction materials. All retail sales data is released monthly, approximately two weeks after the target month.