Retail Sales: Definition, Measurement, and Use As an Economic Indicator

The retailers have a huge assortment of product lines depending on the customers they serve. Retail sales are seen as a stand-in for consumer spending, and by extension, can be seen as a key measure of the health of the economy. The data is also used extensively by various government bureaus. The numbers go into the calculation of the gross domestic product (GDP), are used to develop consumer price indexes, and help analyze current economic activity.

A booming economy is good for all, but lower retail sales figures and a contracting economy would translate to a decrease in inflation. This may cause investors to gravitate toward bonds, eventually leading to higher bond prices. Prices for these products tend to be more volatile and skew the overall number.

  1. The buying cycle for hardline retailers is not very regular.
  2. The retailers have a huge assortment of product lines depending on the customers they serve.
  3. Core retail sales are an important measure of consumer spending, complementing the broader monthly retail sales number.

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The Bureau of Economic Analysis releases the GDP report each quarter throughout the year. If each month’s retail sales are strong, then it’s likely that the GDP report will be solid as well. The only time that won’t be true is if prices are rising due to inflation. The BEA’s report uses so-called real GDP, which does adjust for inflation. Perhaps one of the largest forms of retail is grocery or convenience store retail.

Month-over-month data is the most important of the two as it can alert watchers to an unexpected trend in the making. Markets are also more likely to react to deviations from expectations forex trading online in these numbers. Census Bureau publishes an Advance Monthly Retail Trade Report, that is based on a survey sent out to 5,500 retail and food services companies to report their numbers.

For example, one may purchase a tablet PC or an iPad once every three or four years, automobile every 10 years and so on. Retail sales for February 2024, which is an increase of 0.6% from January 2024. These figures are seasonally adjusted but not adjusted for inflation. This metric shows how this year’s sales compare to last year’s, for the same period and the same stores that have been trading that period in both years.

F) Online retail

Retail sales are a key measure of consumer spending, which accounts for a significant portion of economic activity. Governments, businesses, and economists closely monitor retail sales as they provide insights into consumer confidence, purchasing power, and overall economic health. Changes in retail sales can indicate shifts in consumer behavior, economic trends, and the impact of government policies, among other factors.

Retail Sales

As a broad economic indicator, the retail sales report is one of the timeliest reports because it provides data that is only a few weeks old. Individual retail companies often provide their own sales figures at the same time every month, and their stocks can experience volatility as investors process the data. Retail sales are a good indicator of the pulse of the economy and its projected path toward expansion or contraction. Retail sales figures are reported by all food service and retail stores and compiled by the U.S. The measurement is typically based on data sampling and is used to model the patterns for the entire country. Retail sales refer to the total revenue generated from the sales of goods and services by retailers to individual consumers for personal use.

Reflecting the Economic Environment

For retailers, these products account for high turnover while for customers these are regular purchases and amount to little or the nothing. Walmart is one of the greatest examples of grocery retailer. It is important to note that retail sales include both the sale of goods and services. For example, a retailer selling electronics may generate revenue from selling devices and also providing installation and repair services.

But a variant of the place is the visit of the customer on the website. The higher the online store ranks on google search page the better it is. These are the retailers that have one-time use goods having a limited life cycle. These are normally consumed over a limited period of time and include products like clothing, footwear, cosmetics, etc.

Since it’s such a large component, the Census Bureau report also shows retail sales without auto. Prospecting in retail sales involves, judging and analyzing the customer by the salesperson. Not every walk-in customer is going to buy the product and a bunch of them will be interested only in window shopping.

It is reported as a monthly and year-over-year (YOY) increase or decrease in spending. Together, core retail sales and retail sales give economists and investors a sense of the direction of the U.S. economy. An accurate measure of retail sales is incredibly vital for gauging the economic health of the U.S. This is because consumer spending, or Personal Consumption Expenditure (PCE), accounts for two-thirds of gross domestic product (GDP). Core retail sales are an important measure of consumer spending, complementing the broader monthly retail sales number.

The U.S. government does not impose retail sales taxes, but state and local governments do. Alaska, Delaware, Montana, New Hampshire, and Oregon do not impose sales taxes. In order to keep the monthly report comparable, it is usually divided into sections that exclude some of the categories that fluctuate regularly, such as motor vehicles and gasoline. In a physical store, this could be a cash register or a self-check-out lane.