Microeconomic Indicator in FOREX:
Retail Sales
What are Retail Sales?
The Retail sales figure is generated by the purchases of finished goods and services by end consumers. Supply chain generally starts with the providers of the goods and end with Retail Sales. It measures the purchases of goods over a certain period of time. Retail sales data helps economists in understanding consumer spending habits and the existing demand for the goods that are produced in the country. This data is reported by all the retail stores and the measure is usually based on a data sampling technique which is projected for the entire country.
The Retail sales data of a country is comprised of all forms of sales in the country. Which includes brick & mortar retailers like Walmart & Target, online retailers like eBay & Amazon, TV retailers like QVC and hospitality industries such as hotels, restaurant, etc. Retail Sales is divided into 13 main categories. These 13 categories cover all the sales generating places like Electronic stores, departmental stores, health & wellness stores, furniture stores, food & beverage stores, etc. Auto & Auto part stores are the largest category among these 13 categories while the furniture and electronic industries are the smallest.
What does Retail Sales measure?
Retail sales measure consumer spending and existing demand for finished consumer goods in the country. It is an important measure because consumer spending contributes a major chunk to the country’s GDP. In developed economies like the United States, consumer spending alone contributes more than 70 per cent of the total economic output. Hence Retail Sales is considered a major driver of the country’s economic health. If the retail sales of a country increases, the GDP will eventually increase. This won’t be true if the increase in consumer spending caused by the rise in prices due to inflation and the retail sales report doesn’t adjust for inflation.
Reliable sources of information on ‘Retail Sales’ for Major currencies:
Retail Sales data has a lot of components comprised in it. You can check the below links for more information about retail sales with respect to each of the country and their currencies. A lot of trended retail sales data is available in these sources through which you can understand how this data has changed over time. You also can compare the retail sales data of one country to the other using these sources. The graphical depiction of the historical data pertaining to retail sales will give you a clear understanding of how this data has evolved. You also get to change the visualization of the pictographic representation according to your preference. A lot more interesting information and the latest news about this indicator are provided for your reference.
GBP (Sterling) - https://tradingeconomics.com/united-kingdom/retail-sales-mom
AUD - https://tradingeconomics.com/australia/retail-sales-mom
USD - https://tradingeconomics.com/united-states/retail-sales-mom
CHF - https://tradingeconomics.com/switzerland/retail-sales-mom
EUR - https://tradingeconomics.com/euro-area/retail-sales-mom
CAD - https://tradingeconomics.com/canada/retail-sales-mom
NZD - https://tradingeconomics.com/new-zealand/retail-sales-mom
JPY - https://tradingeconomics.com/japan/retail-sales-mom
What do traders care about Retail Sales and its impact on the currency?
Retail Sales directly correlates to the consumer spending which is one of the major contributors to the country’s GDP. If a country achieves strong month-on-month retail sales, the quarterly GDP report eventually comes out strong. Since the Retail Sales figure of a country is the primary gauge of consumer spending, it is a very strong indicator of the nation’s economic pulse. If the retail sales increase considerably, the GDP will increase and the economy strengthens. This will eventually help in the strengthening of that country’s currency. So traders must consider looking at the month-on-month retail sales statistics of the country to efficiently forecast the strengthening or the weakening of the currency.
Frequency of the release
Retail Sales numbers of a country are released on a monthly basis. For the U.S. it’s the ‘Census Bureau’ that releases this data. Different countries have different boards. For instance, in Canada, this data is released by ‘Statistics Canada’ and Australia’s retail sales are reported by ‘Australian Bureau of Statistics’. Even though this data is released on a monthly basis for all the countries, the publish dates differ from country to country. The U.S. publishes the retail sales report 13 days after the month ends while Canada & Australia publishes its report 50 days & 35 days after the month ends respectively. Apart from monthly releases, a yearly report of the country’s retail sales data is released by the same board to give economists and traders a broader picture.
The Bottom Line
Traders & investors must pay attention to retail sales statistics to understand how the economy of a country is doing. The 13 categories that are considered to measure this data have their own importance in contributing to the retail sales of the country. Growth in any of these 13 categories will have a positive impact on the economy but the degree varies. For example, if there is a strong growth in automobile sales in the U.S. it will create more manufacturing jobs. But even if there is an increase in the apparel industry, it won’t create more U.S. jobs as most of those jobs are outsourced to other countries. If there is a growth in the hospitality industry, it may create more jobs, but most of them are paid much lesser compared to the manufacturing jobs. Yearly retail sales data is also published and looking at that data in addition to the monthly percentage changes will give you a better understanding of how this data is correlating to the GDP data. The retail sales growth of the previous year will give you a better indication when compared to the GDP growth of the prior year.
