Retail Sales


Consumer expenditures generally make up about two-thirds of total gross domestic product

In the U.S., the Advance Monthly Retail Trade Report (retail sales report) is a monthly economic indicator compiled and released by the Census Bureau and the Department of Commerce. The retail sales report estimates consumer retail spending (in-store sales as well as catalog and other out-of-store sales) but not service spending. Responses from 5,000 surveys sent to retailers around the U.S. Companies of all sizes, from Wal-Mart to independent, small-town businesses determine consumer retail spending. The report also breaks down sales figures into groups such as food and beverages, clothing, and autos. Two ways report the results of the surveys: with and without auto sales because their high sticker price can add extra volatility to the data. Numbers are nominal (not adjusted for inflation). Year-over-year historical comparisons are the most-reported metric because they account for the seasonality of consumer-based retail.

Estimates are of the U.S. Census Bureau and are shown in millions of dollars. 21st Century Builder.

Estimates are of the U.S. Census Bureau and are shown in millions of dollars. 21st Century Builder.

Retail Sales is closely watched by both economists and investors

Retail Sales reflects the current state of the economy (coincident indicator); it is also considered an indicator of impending inflation.

  1. Increasing retail sales indicates the economy is up, which means better business for retailers, their suppliers and the manufacturers of those goods. Ultimately this leads to more employment and better wages, and ultimately more consumer spending and better retail sales.
  2. When Retail Sales are down, this indicates a slow economy; in other words, if consumers feel uncertain about their financial future and decide to hold off buying new stoves or sweaters, and the economy slows down, which can lead to recession.


When there is a threat of recession, the Central Banks (in the U.S. it is the Federal Reserve Board) uses three methods to increase (or decrease) the amount of money in the banking system. A monetary policy refers to the following actions:

  1. The Fed can influence the money supply by modifying reserve requirements, which is the amount of funds banks must hold against deposits in bank accounts. By lowering the reserve requirements, banks can loan more money, which increases the overall supply of money in the economy. Conversely, by raising the banks’ reserve requirements, the Fed can decrease the size of the money supply.
  2. The Fed can also alter the money supply by changing short-term interest rates. By lowering (or raising) the discount rate that banks pay on short-term loans from the Federal Reserve Bank, the Fed can effectively increase (or decrease) the liquidity of money. Lower rates increase the money supply and boost economic activity; however, declines in interest rates fuel inflation.
  3. The Fed can affect the money supply by conducting open market operations, which affects the federal funds rate. In open operations, the Fed buys and sells government securities in the open market. If the Fed wants to increase the money supply, it buys government bonds, which supplies the securities dealers who sell the bonds with cash, increasing the overall money supply. Conversely, if the Fed wants to decrease the money supply, it sells bonds from its account, thus taking in cash and removing money from the economic system.

Your thoughts and comments are appreciated