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What Is Retail Sales

 

 

Retail sales are finished goods and services sold to either consumers or businesses. Retail products are at the end of the supply chain. The beginning of the supply chain are commodities or other raw materials. The middle of the supply chain is wholesale sales. 

 

These are the goods and services sold to businesses that create the final retail products.  

Retail sales statistics measure the demand for these end products. They are an important economic indicator. That's because consumer spending is nearly 70% of total U.S. economic output. For more, see Components of GDP.

The retailing industry is the distributor of these goods and services. That includes brick-and-mortar stores, like Target and Macy's. It also includes online retailers, such as Amazon. It also includes home sales and TV retailers. In addition, the retail industry also sells services. That includes restaurants, hotels, and hairdressers.

The most critical time of the year in retail sales is the holiday shopping season. Nearly 20% of retail sales occur then. It starts on Black Friday. It includes Cyber Monday, Green Monday, and every shopping day through Christmas.

 

What's Measured in Retail Sales? 

The Census Bureau surveys 4,900 firms each month to collect retail sales data. The report shows the total sales for the last month. It also displays the percent change for that month, and the percent change in year-over-year sales for the last 12 months. 

The Census Bureau doesn't adjust for inflation in the report. That means volatile gas and oil prices can be misleading. Gas prices typically rise in the spring in advance of demand for the summer driving season. That makes it seem like retail sales are skyrocketing. Sales seem to be dropping like a stone in the late summer or fall. That's when gas prices fall as vacationers return home. 

 

Components of Retail Sales 

The largest category of retail sales (20%) is auto and auto parts stores. That's why the Census Bureau report also shows retail sales without auto.  

Department and discount stores comprise 13% of total sales. Grocery stores are slightly less. Gas stations and restaurants are slightly less than 10% each. Apparel stores and drugstores come in at 5% each. Furniture stores and consumer electronics are around 2.5% each. Here are the 13 retail categories:  

Auto dealers, including auto parts, new and used vehicle sales. 

Non-store retailers. That measures online retail sales. 

Department stores. 

Apparel, such specialty clothing stores.

Electronics and appliance stores, including big box retailers like Best Buy.

Food and beverage stores, including grocery and liquor stores. 

Building and garden supply stores, such as Lowes and Home Depot. 

Sporting goods/hobby stores, like Hobby Lobby and Michaels. 

Health/beauty shops, including drugstores

Furniture stores 

Hospitality and leisure, including hotels, restaurants, and bars.

Gas stations

 (Source: Census Bureau, How Surveys Are Collected) 

How to Use the Retail Sales Report to Predict Economic Growth 

Retail sales are used to predict consumer spending trends. That's because the report comes out monthly.  U.S. economic growth, as measured by Gross Domestic Product (GDP), is reported quarterly. Therefore, strong retail sales will translate to better GDP report. But you must look at year-over-year retail sales. That's because GDP is an annualized number. That means it gives an estimate for a year. GDP growth compares this annualized figure to the prior year.  

Keep in mind, as well, that GDP growth uses so-called real GDP figures. They eliminate the effects of inflation. The year-over-year retail sales reports use nominal figures. They could give a different report if inflation is very high, or if there is deflation. Therefore, when using the retail sales report for forecasting, you should also look at orders for durable goods. That's another great leading economic indicator. 

There are also forecasts of specific holiday sales. The National Retail Federation surveys shoppers to find out how much they plan to spend for the major holidays. The report on Halloween spending provides early clues for the holiday shopping season. Black Friday sales are also obviously important. The NRF also reports on retail sales for Valentine's Day, Mother's Day, Father's Day and Back-to-School 

Compiled in Editorial Board of Retailiran

 

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