What Are Retail Sales?

Retail sales measure the purchases of durable and non-durable goods over a certain period of time—usually once a month. This figure monitors and tracks consumer spending habits and the demand for finished goods. These sales are reported by all food service and retail stores. The measure is typically based on a data sampling used as a model for the entire country.

Retail sales are a good indicator of the pulse of the economy, and its projected path toward expansion or contraction. As a leading macroeconomic indicator, healthy retail sales figures typically elicit positive movements in equity markets. Higher sales are good news for shareholders of retail companies because it means higher earnings. On the other hand, bondholders typically prefer lower sales because it means higher bond prices, which comes with a slowdown in the economy.

Understanding Retail Sales

Retail sales capture in-store sales, as well as catalog and other out-of-store sales of both durable (last for more than three years) and non-durable goods (those with a short life span). These are broken down into a number of different categories including (but not limited to):

  • Apparel
  • Department stores
  • Food and beverage stores
  • Electronics and appliances
  • Furniture stores
  • Gas stations
  • Car dealers

As a broad economic indicator, the retail sales report is one of the timeliest and provides data that is only a few weeks old. Individual retail companies often provide their own sales figures at the same time per month, and their stocks can be volatile at this time as investors process the data.

Major changes in price can affect retail sales figures. These fluctuations in prices are seen primarily in two main retail sales categories: food retailers and gas stations. Large increases in food and energy prices can cause sales figures to drop in both categories, thus affecting the sales of a particular month.

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Retail Sales

Retail Sales Report

Consumer spending accounts for two-thirds of a nation's gross domestic product (GDP). That's why retail sales are considered a major driver of the economic health of a nation.

Retail sales are reported in the United States on a monthly basis in the retail sales report. The data for the report is collected by the U.S. Bureau of the Census in its Monthly Retail Trade Survey. The report outlines the total number of sales from the previous month and the percentage change from the month before. The report also includes the year-over-year change in sales, as they account for the seasonality of consumer-based retail.

The sales figures are often presented in two ways: with and without the inclusion of auto sales because their high sticker price can add extra volatility to the data. Many economists choose to analyze retail sales without including car sales because these figures tend to fluctuate more than other sales. The same applies to gas station sales which are subject to oil and gas price volatility.

Retail sales are affected by seasonality. The fourth quarter—the months between October and December—typically has the highest level of sales, due in part to the holiday shopping season. The most seasonal retail sectors include electronics, sporting goods, online retail, and clothing.

Key Takeaways

  • Retail sales are the total number of sales made of durable and non-durable goods over a certain period of time.
  • Data is compiled by the U.S. Bureau of the Census and includes sales from all food service and retail stores, usually once a month.
  • Retail sales, which monitor consumer spending and demand, are a good indicator of the pulse of the economy and account for two-thirds of GDP.