1. Economic Indicators: Introduction
  2. Economic Indicators: Beige Book
  3. Economic Indicators: Business Outlook Survey
  4. Economic Indicators: Consumer Confidence Index (CCI)
  5. Economic Indicators: Consumer Credit Report
  6. Economic Indicators: Consumer Price Index (CPI)
  7. Economic Indicators: Durable Goods Report
  8. Economic Indicators: Employee Cost Index (ECI)
  9. Economic Indicators: Employee Situation Report
  10. Economic Indicators: Existing Home Sales
  11. Economic Indicators: Factory Orders Report
  12. Economic Indicators: Gross Domestic Product (GDP)
  13. Economic Indicators: Housing Starts
  14. Economic Indicators: Industrial Production
  15. Economic Indicators: Jobless Claims Report
  16. Economic Indicators: Money Supply
  17. Economic Indicators: Mutual Fund Flows
  18. Economic Indicators: Non-Manufacturing Report
  19. Economic Indicators: Personal Income and Outlays
  20. Economic Indicators: Producer Price Index (PPI)
  21. Economic Indicators: Productivity Report
  22. Economic Indicators: Purchasing Managers Index (PMI)
  23. Economic Indicators: Retail Sales Report
  24. Economic Indicators: Trade Balance Report
  25. Economic Indicators: Wholesale Trade Report

The Retail Sales Report, released monthly by the U.S. Census Bureau, is very closely watched by both economists and investors. The Census Bureau has been releasing the report since 1951 and they adjust the sample of retail outlets used every five years to stay current.

This indicator tracks the dollar value of merchandise sold within the retail trade by taking a sampling of companies engaged in the business of selling end products to consumers. Both fixed point-of-sale businesses and non-store retailers (such as online sellers) are used in the data sample. Companies of all sizes are used in the survey, from Wal-Mart to independent, small-town businesses. (For related reading, see Using Consumer Spending As A Market Indicator.) These companies provide data including retail sales and month-end inventories.

Why it’s important

The data from the Retail Sales Report is widely used by various government agencies, academic analysts and researchers, economists, businesses and investors. It is a component in the calculation of Gross Domestic Product, a key economic indicator.

The Fed uses this data to analyze recent trends in consumer purchases as part of their overall analysis of the economy and recent trends. The results of the report are widely reported by the financial media. Investors use the data to measure trends in consumer spending as part of their overall analysis of business and economic trends, and of industries impacted more directly by this data.

The release of the Retail Sales Report can cause above-average volatility in the stock market. Its clarity as a predictor of inflationary pressure can cause investors to rethink the likelihood of Fed rate cuts or hikes, depending on the direction of the underlying trend.

If retail sales growth is stalled or slowing, this means consumers are not spending at previous levels, and could signal a possible recession due to the significant role personal consumption plays in the health of the economy.

One of the most important factors investors should note when viewing the indicator is how far off the reported figure is from the so-called consensus number, or "street number." In general, the stock market does not like surprises, so a figure that is higher than expected could trigger selling of stocks and bonds, as inflationary fears would be deemed higher than expected.

Strengths:

  • The retail sales data is extremely timely, and is released within two weeks after the month it covers
  • The data release is robust; investors can download a full breakout of component sectors, as well as a spreadsheet of historical data to examine trends
  • It's an indicator that is easy to understand and relates closely to the average consumer
  • A revised report comes out later (two to three months on average), amending any errors
  • Analysts and economists will take out volatile components to show the more underlying demand patterns. The most volatile components are autos, gas prices and food prices.
  • Data is adjusted seasonally, monthly and for holiday differences month to month

Weaknesses:

  • 20% of all retail sales take place during Christmas/New Year’s holidays each year, so seasonality is a major factor
  • Revisions to the report (released about two months after the advance report) can be quite large, and the sample size is relatively small compared to the total number of retailers
  • Retail sales data is often volatile from month to month, which makes trend-spotting difficult
  • The indicator is based on dollars spent and does not account for inflation, making it difficult for individual investors to make decisions based on the raw data
  • Does not account for retail services, only physical merchandise. The U.S. is an increasingly service-based economy, so not all retail "activity" is captured

Economic Indicators: Trade Balance Report
Related Articles
  1. Investing

    Consumer Spending As A Market Indicator

    What people buy and where they shop can provide valuable information about the economy.
  2. Insights

    April Retail Sales Rise 1.3%, Beat Expectations

    April Retail Sales Report
  3. Investing

    CPI, Beige Book and Other Economic Indicators That Do-It-Yourself Investors Should Know

    Understanding these investing tools will put the market in your hands.
  4. Trading

    The Fundamentals Of Forex Fundamentals

    Charting is not the only way to analyze the foreign-exchange market. Learn how to apply fundamental analysis to the economic indicators.
  5. Investing

    The 4 R's Of Investing In Retail

    In retail, successfully managing return on investment (ROI) and other financial indicators is the key to a healthy business.
  6. Trading

    5 Reports That Affect The U.S. Dollar

    These five reports provide short- and long-term insight into the valuation of the U.S. dollar.
  7. Insights

    U.S. Retail Sales Flat In July

    U.S. retail sales missed expectations in July putting a damper on growth and decreasing the chances of a rate hike.
  8. Investing

    How Does Sampling Work?

    Sampling is a term used in statistics that describes methods of selecting a pre-defined representative number of data from a larger data population.
  9. Investing

    Playing The Decline of Traditional Retailers (XRT, RTH)

    Play the decline of traditional retailers with a strategy that lowers built-in exposure to online sales.
Frequently Asked Questions
  1. Why Do Most of My Mortgage Payments Start Out as Interest?

    Fear not: Over the life of the mortgage, the portions of interest to principal will change.
  2. What is the difference between secured and unsecured debts?

    The differences between secured and unsecured debt, and how banks buffer risks associated with each type of loan through ...
  3. How Many Times has Warren Buffett Been Married?

    Warren Buffett has been married twice in his life, but the circumstances surrounding the marriages were unconventional.
  4. What's the smallest number of shares of stock that I can buy?

    Many people would say the smallest number of shares an investor can purchase is one, but the real answer is not as straightforward. ...
Trading Center