Retail Sales

The Retail Sales report provides feedback on consumer spending and is one of the first reports available each month that tracks retail spending patterns. This report provides feedback on consumer goods exclusively; spending on services such as health care and education is not included in the Retail Sales report. Also, the report is published without adjusting for inflation, so to get a true measure of changes in retails sales spending, you must adjust accordingly.

It is not uncommon for the retail sales report to undergo significant revisions even after it is released as compiling accurate and complete retail sales totals can be very difficult. For this reason, there have been instances where the published retails sales report values differed significantly from expectations; and as all traders will tell you, any economic indicator that releases unexpected results causes much greater reaction in the markets than an indicator released with the expected results.

Effect on the Markets

FX Market

The Retails Sales report is not seen as particularly relevant to the FX market, but if the report is stronger than expected, it might indicate an overall growth of the economy, making the currency more attractive to investors.

Bond Market

The bond market usually sees an increase in retail sales as a negative – or bearish – sign for bonds. The concern stems from the possibility that an interest rate hike may be necessary if the economy is expanding too rapidly, and the more that short-term interest rates increase, the less attractive locked-in long-term rates for bonds becomes for investors. This is due to the narrowing of the liquidity spread between bonds and short-term interest rates.

Stock Market

Unless there is a concern of an interest rate increase, the stock market sees a positive Retails Sales report as an indication of a strong economy and a favorable environment for businesses to realize operational profits.

Market Relevance

Moderate for Stocks and Bonds – Low for FX

When Published

2nd week of each month

Volatility

High - the Retail Sales Report provides the first look at spending and predictions for other indicators - most notably employment figures - are based on the Retail Sales Report results.