Retail sales are an economic metric that tracks consumer demand for finished goods. This crucial data set is a key monthly market-moving event, reported each month by the U.S. Census Bureau, and serves as a vital indicator of economic direction and inflationary pressures. Retail sales are measured by durable and non-durable goods purchased over a defined period, derived from 13 types of retailers ranging from food service to retail stores.
Key Takeaways
- Retail sales represent a key macroeconomic metric that tracks consumer demand for finished goods.
- Consumer purchases of durable and non-durable goods are compiled in a report.
- The retail sales report helps analysts and investors gauge the health of the economy and any inflationary pressures that may exist.
- Data is gathered by the U.S. Census Bureau and includes sales from 13 types of food service and retail stores.
- An accurate measure of retail sales is vital for gauging the economic health of the U.S. because consumer spending accounts for two-thirds of the gross domestic product.
Understanding Retail Sales
Retail sales are a good indicator of the pulse of the economy and its projected path toward expansion or contraction. Retail sales figures, reported by all food service and retail stores, are compiled by the U.S. Census Bureau. This measurement, typically based on data sampling, models the patterns for the entire country.
As a leading macroeconomic indicator, healthy retail sales figures typically create positive movements in equity markets. Higher sales are good news for shareholders of retail companies because this also means higher earnings. Bondholders, meanwhile, may view retail sales data ambivalently, as a booming economy benefits all, but lower sales and a contracting economy could lead to decreased inflation and higher bond prices.
Retail sales cover in-store, catalog, and other out-of-store sales of both durable (lasting more than three years) and non-durable goods (having a three-year or shorter lifespan).
Categories of Retail Sales
- Clothing and clothing accessories stores
- Pharmacies and drug stores
- Food and beverage stores
- Electronics and appliance stores
- Furniture stores
- Gasoline stations
- New car dealers
The retail sales report is one of the timeliest economic indicators, providing data typically only a few weeks old. As individual retail companies often provide their own sales figures concurrently, their stocks can experience volatility as investors process the new data.
Price changes significantly affect retail sales figures, especially in food and gas stations categories. When prices rise substantially, sales figures in these categories usually dip, influencing overall retail sales figures.
$709.6 billion: Retail sales for March 2024 increased by 0.7% from February’s $704.5 billion. These numbers are seasonally adjusted but not inflation-adjusted.
Special Considerations
Accurate retail sales measurement is essential for gauging the U.S. economy’s health as consumer spending, or Personal Consumption Expenditure (PCE), accounts for two-thirds of the gross domestic product (GDP). Monthly retail sales reports from the U.S. Census Bureau provide total sales for a specified period (usually the prior month) and show percentage and year-over-year changes to account for seasonality.
Sales figures are presented two ways: with and without auto and gas sales, as these tend to fluctuate more due to uncontrollable price changes, leading economists often to exclude them for a more accurate review.
Seasonality impacts retail sales, with the holiday shopping season leading to high sales levels, especially from Christmas shopping impacting stores selling toys, games, and department store goods.
How Is Retail Sales Data Calculated?
Monthly, the Census Bureau in the U.S. Department of Commerce compiles and releases retail sales figures around the middle of the following month, covering the previous month’s sales.
How Does Inflation Impact Retail Sales?
High inflation spikes the prices of most goods and services, leading consumers to scale back on spending or focus on necessities and more inflation-proof purchases.
Why Are Retail Sales Important?
Retail sales are a key proxy for consumer spending, thus serving as a critical measure of the health of the economy.
The Bottom Line
Retail sales are fundamental indicators signaling economic contraction or expansion. An uptick in retail sales suggests a growing economy, with upbeat implications for shareholders. Conversely, a decline signals economic downturn, guiding investors accordingly.
Related Terms: Gross Domestic Product (GDP), Personal Consumption Expenditure (PCE), inflation, economic indicator, equity markets.
References
- U.S. Census Bureau. “Advance Monthly Retail Trade Survey: Methodology”.
- U.S. Bureau of Economic Analysis. “Nondurable Goods”.
- U.S. Bureau of Economic Analysis. “Durable Goods”.
- U.S. Census Bureau. “Advance Monthly Retail Trade Survey - General FAQs”.
- U.S. Census Bureau. “Advance Monthly Sales for Retail and Food Services”, Page 5.
- U.S. Census Bureau. “Advance Monthly Sales for Retail and Food Services”, Page 1.
- Congressional Research Service. “Introduction to the U.S. Economy: Consumer Spending”, Page 1.
- U.S. Census Bureau. “Advance Monthly Sales for Retail and Food Services”, Pages 2, 5.
- U.S. Census Bureau. “Monthly State Retail Sales (MSRS) Schedule Release Dates”.
- Salesforce 360 Blog: Retail. “Shoppers Call the Shots in Retail Now, Our Holiday Results Show”.
- USAFacts. “What Types of Stores Have the Highest Sales During the Holiday Season?”
