Retail Sales Index
A monthly measurement of all goods sold by retailers based on a sampling of retail stores of different types and sizes. The retail sales index is often taken as an indicator of consumer confidence. This report is the “advance” report, which can be revised fairly significantly after the final numbers are calculated.
Many analysts choose to look at the figures “ex-auto”, which means excluding the volatile car sales figure. It is thought that this number is a better measure of across-the-board purchasing trends. The report does not include money spent on services, so it represents less than half of total consumption during the month. However, even with these limitations, the figures are closely watched as an indicator of the health of the economy.
Another aspect of the retail sales release that deserves attention is inflation. Because sales are reported in current dollars, extraordinary price level swings can distort the overall sales picture. An example of this would be a rapid upswing in gasoline prices, similar to the one seen during the Persian Gulf War. During that time, a tremendous portion of retail sales gains were attributed to an increase in the dollar value of service station sales.
It is also helpful to examine several months of Retail Sales data. Less-than-perfect seasonal adjustments are often to blame when one particularly weak month is followed by a strong month. A moving average of three months worth of data can often paint a clearer picture.
Bondholders favor a decline in retail sales because such weakness signals a slowing economy. A strong economy brings fears of inflation, which weigh heavily on bond prices.