What are Retail Sales
Retail sales are an aggregated measure of the sales of retail goods over a stated period. The measure is typically based on a data sampling that is extrapolated to model an entire country. Because retail sales are a measure of consumer demand for finished goods, they are an indicator of the pulse of an 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.
BREAKING DOWN Retail Sales
In the United States, retail sales are a monthly economic indicator. The retail sales report, compiled and released by the Census Bureau and the Department of Commerce, covers the previous month and is released approximately two weeks after the month-end. Comparisons are made against historical data; year-over-year comparisons are the most-reported metric because they account for the seasonality of consumer-based retail.
Behind the Retail Sales Report
The retail sales report captures in-store sales as well as catalog and other out-of-store sales. The report also breaks down sales figures into groups such as food and beverage, clothing and automobiles. The results are often presented two ways: with and without the inclusion of auto sales because their high sticker price can add extra volatility to the data.
Retail sales figures are vital to stock investors and particularly those who directly invest in retail companies. The figures are also a big component of the total gross domestic product (GDP) in the United States, so any extended drop-offs in retail spending can trigger a recession by lowering tax receipts and forcing companies to reduce their workforce.
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.
Retail Sales and the U.S Economy
Retail sales reports are a key economic indicator and reflect statistics culled from thousands of retail outlets and food service entities. Consumer spending accounts for two-thirds of GDP; therefore, retail sales are considered a major driver of the economic health of a nation.
In December 2017, U.S. retail sales rose 0.4 percent, which reflected an increase in sales of building materials and online sales. Grocer sales, furniture sales, and sales of consumer electronics also increased. Losses were shown in clothing, music stores, and electronics.
Retails sales rose by 5.5 percent year-over-year. Sales at gas stations were up 9.9 percent, and building materials rose 9.7 percent. Online retailers gained 11 percent. In December, online retail sales were 13.5 percent of total retail sales, which is double the market share it owned in 2005.
In a strong economy, annual retail sales grow by approximately 3 percent or more. Therefore, the 5.5 percent increase reported for December 2017 shows a robust economy in the fourth quarter.