Retail sales announcements report on how much money individual consumers are spending on retail goods. This is where the rubber meets the road in terms of translating consumer confidence into consumer action. Consumers can say that they are confident about the economy, but unless they follow it up with actual purchases, their confidence doesn’t do much to grow the economy.
Retail sales data are released in multiple announcements that you need to be aware of:
- Retail sales: Measurement of goods purchased by individual consumers
- Personal spending or personal consumption expenditures (PCE): Another measurement of goods purchased by individual consumers
- Weekly chain-store sales snapshot: Weekly measurement of sales at major department stores
- Johnson Redbook Index: Another weekly measurement of sales at major department stores
Impact on Trade Flows
Rising Retail Sales–> Increased Demand for Imports –>Increase in Trade Flows
Falling Retail Sales–> Decreased Demand for Imports –>Decrease in Trade Flows
Impact on Investment Flows
Rising Retail Sales –>Increase in Corporate Profits–> Rising, More Attractive Stock Market –> Increase in Investment Flows
Rising Retail Sales –>Rising Inflation–> Central Bank Raising Interest Rates –> More Attractive Government Debt Market –> Increase in Investment Flows
Falling Retail Sales –>Decline in Corporate Profits–> Falling, Less Attractive Stock Market –>Decrease in Investment Flows
Falling Retail Sales –> Falling Inflation –>Central Bank Lowering–> Interest Rates–> Less Attractive Government Debt Market–>Decrease in Investment Flows
Impact on Money Supply
Rising Retail Sales –> Rising Inflation –>Central Bank Raising Interest Rates–> Decrease in the Money Supply
Falling Retail Sales –> Falling Inflation–>Central Bank Lowering Interest Rates –>Increase in the Money Supply
Impact on Investor Fear
Rising Retail Sales -> Confident Investors
Falling Retail Sales -> Nervous Investors
Typical Impact on the Currency
Rising Retail Sales -> Stronger Currency
Falling Retail Sales -> Weaker Currency
