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Fundamental Analysis |
Retail Sales
Definition Retail sales measure the total receipts at stores that sell durable and nondurable goods.
ImportanceRetail sales are a major indicator of consumer spending trends because they account for nearly one-half of total consumer spending and approximately one-third of aggregate economic activity.
Why do Investors Care?Consumer spending accounts for two-thirds of the economy, so if you know what consumers are up to, you'll have a pretty good handle on where the economy is headed. Needless to say, that's a big advantage for investors.
The pattern in consumer spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth. This balance was achieved through much of the nineties. For this reason alone, investors in the stock and bond markets enjoyed huge gains during the bull market of the 1990s. Retail sales growth did slow down in tandem with the equity market in 2000 and 2001.
Retail sales not only give you a sense of the big picture, but also the trends among different types of retailers. Perhaps auto sales are especially strong or apparel sales are showing exceptional weakness. These trends from the retail sales data can help you spot specific investment opportunities, without having to wait for a company's quarterly or annual report.
Interpretation Strong retail sales are bearish for the bond market, but favourable for the stock market, particularly retail stocks. Sluggish retail sales could lead to a bond market rally, but will probably be bearish for the stock market. |
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Frequency Monthly.
SourceBureau of the Census, U.S. Department of Commerce.
Availability Usually the second or third week of the month
Coverage Data are for the previous month. (Data for June are released in July.)
Revisions Monthly, data for the two prior months are revised to incorporate more complete information. This revision affects at least three years of data. The magnitude of the revisions is usually moderate. |
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