What are retail sales?

Retail sales measure the total revenue generated by U.S. retailers from the sale of goods and services to consumers. This data, released monthly by the U.S. Census Bureau in the retail sales report, provides valuable insights into consumer spending habits and overall economic health.

Sales data for the report is collected through the Monthly Retail Trade Survey (MRTS), which surveys around 13,000 retail businesses across various sectors, including department stores, supermarkets, gas stations, and online retailers. Retail sales data captures values for both durable (products expected to last more than three years) and non-durable goods (products expected to last three years or less). After collection, the data is adjusted for seasonal factors and modeled to represent national trends.

Retail sales are important because they serve as a key indicator of consumer demand, which drives a significant portion of the economy. Policymakers use the report to gauge economic growth and adjust fiscal or monetary policies, while businesses rely on the data to plan inventory, pricing, and marketing strategies. Investors also monitor retail sales to assess market conditions and consumer confidence, helping them make informed decisions.

What factors influence retail sales?

Retail sales are influenced by various factors, including consumer confidence, employment and income levels, and seasonal or cyclical trends. These factors directly impact how much consumers spend and where they allocate their money.

Consumer confidence

Consumer confidence reflects how optimistic people feel about their current and future financial situation as well as the overall economy.

When consumer confidence is high – driven by factors like job security or income growth – people are more likely to increase spending on discretionary items like electronics or luxury goods. Conversely, when confidence is low, due to economic uncertainty or market instability, spending tends to focus on necessities like groceries and utilities, which may reduce overall retail sales.

Employment & income levels

Strong job markets and higher disposable income often lead to increased consumer spending, which can boost retail sales. When employment rates are high, consumers tend to have more money to spend on non-essential goods and services. On the other hand, high unemployment rates may result in reduced retail activity as consumers prioritize basic needs and limit discretionary spending.

Seasonal & economic cycles

Retail sales often fluctuate throughout the year due to seasonal and economic cycles. For example, certain times of year like Christmas, Black Friday, and back-to-school season, create surges in retail sales as consumers shop for gifts and school supplies.

Economic cycles can also play a role. During periods of economic growth, spending tends to increase, while during downturns, consumers may cut back on purchases and focus on saving money.

How do retail sales impact the economy?

Retail sales serve as a vital economic indicator that reflects consumer spending, the largest component of gross domestic product (GDP). Here are some ways retail sales can influence the economy:

• Economic health: Retail sales provide insights into overall economic health. Strong sales can indicate a growing economy with increased consumer confidence, while declining sales can signal an economic slowdown or reduced household spending.
• Business decisions: Retailers and manufacturers use retail sales data to adjust their strategies. For example, high sales may encourage businesses to hire more staff or expand operations, while low sales might lead to cost-cutting measures, such as reducing inventory.
• Monetary policy: The Federal Reserve monitors retail sales to assess economic activity and guide monetary policy decisions. Strong retail sales could lead to interest rate hikes to prevent inflation, while weak sales might prompt rate adjustments to stimulate spending and economic growth.
• Employment: Retail sales also affect the job market in the retail and manufacturing sectors. High sales can lead to more hiring, boosting household incomes, while slow sales may result in layoffs or reduced work hours, which in turn can impact overall consumer spending.
• Investments: Retail sales can also influence stock market trends and investor sentiment. For example, strong sales can boost revenues and share prices of retail companies, while declining sales may dampen investor confidence and lead to market corrections.

How do seasonal changes affect retail sales?

Seasonal changes can have a significant impact on retail sales data, as consumer spending tends to fluctuate throughout the year based on specific events and holidays. For example:

• Holiday season: The holiday season, including Christmas and Thanksgiving, is one of the biggest drivers of retail sales. During this period, consumer spending often increases as people purchase gifts, decorations, and other holiday-related items.
• Black Friday: Black Friday is a major shopping event where retailers offer significant discounts. This drives a surge in consumer spending across categories like electronics, apparel, and home goods.
• Back-to-school shopping: Back-to-school season is another peak period for retail sales. During this time, families spend more on school supplies, electronics, clothing, and footwear to prepare for the new academic year.

What are some examples of retail sales categories?

The retail sales report captures in-store, catalog, and online sales for both durable goods (lasting more than three years) and non-durable goods (lasting three years or less). These sales are divided into several categories:

• Retail & food services
• Motor vehicle & parts dealers
• Furniture & home goods stores
• Electronics & appliance stores
• Building material & garden supplies
• Food & beverage stores
• Health & personal care stores
• Gasoline stations
• Clothing & clothing accessories
• Sporting goods, hobby, musical instruments & book stores
• General merchandise stores
• Miscellaneous retailers
• Nonstore retailers (e.g. online shopping)
• Food services & drinking places.

Retail sales FAQs

Below are answers to some common questions about retail sales.

What is an example of a retail sales report?

An example of a retail sales report is the U.S. Retail Sales Report, which is released monthly by the U.S. Census Bureau. This report tracks the total sales of retail goods and services for the previous month and changes from the previous report and year.

The report typically includes:

• Total retail sales: This measures the total amount of sales across all retail establishments, including brick-and-mortar stores as well as online retailers. It provides a broad view of consumer activity.
• Sales by category: The sales report also breaks data down into categories and subcategories, such as clothing, furniture, and electronics. This offers insights into spending trends within specific sectors.
• Seasonal adjustments: Retail sales data is often adjusted to account for predictable fluctuations, such as holiday shopping, providing more accurate month-to-month comparisons.
• Revision history: Past reports may be updated with new or updated information as more accurate data becomes available.

The report also highlights key metrics and indicators, such as:

• Month-over-month change: This tracks how retail sales have changed compared to the previous month’s report, revealing short-term trends and fluctuations in consumer spending.
• Year-over-year comparison: This compares current sales data to the same month in the previous year, providing a broader perspective on long-term trends.
• Core retail sales: This metric excludes volatile sectors like auto and car sales, to provide a clearer picture of consumer spending habits.
• Retail sales excluding autos: This focuses on retail activity without automobile sales, which can fluctuate significantly based on seasonality, new model releases, and incentives.

Why do economists monitor retail sales data?

Economists monitor retail sales data because it offers valuable insights into consumer spending, which is a key indicator of economic health. High retail sales often indicate strong consumer demand, reflecting economic growth or expansion. Conversely, declining retail sales may signal reduced consumer spending, potentially pointing towards economic contraction.

Retail sales data also helps economists assess the impact of monetary and fiscal policies, such as interest rate changes or stimulus programs, on consumer behavior. Retail sales trends can also be used to forecast GDP growth, inflation, and employment, making the report an important tool for gauging overall economic health. 

What role does consumer confidence play in retail sales?

Consumer confidence is a major driver of retail sales as it reflects how optimistic people feel about their current and future financial situations. When consumer confidence is high, people are more likely to spend money on goods and services, leading to higher retail sales. On the other hand, low consumer confidence tends to reduce spending on non-essential goods and services, which can lower overall retail sales.