What is the retail sales report?

The Advance Monthly Retail Trade Survey, published by the Census Bureau, measures total receipts at approximately 5,500 retail and food service firms across the United States. Because consumer spending represents roughly 70% of US GDP, the retail sales report is one of the most closely watched monthly economic indicators. It provides the first comprehensive look at how consumers are spending, released approximately two weeks after the reference month ends.

The headline retail sales number includes all categories, from auto dealers and gas stations (which are volatile and driven by price fluctuations) to general merchandise, clothing, and restaurants. Economists often focus on "retail sales excluding autos" (since auto purchases are lumpy and can swing the headline) and "retail sales excluding autos and gas" (which strips out the most volatile components). The most important sub-measure for GDP forecasting is the "control group," which excludes autos, gas, building materials, and food services. The control group feeds directly into the BEA's estimate of personal consumption expenditures in the GDP calculation.

The report is nominal, meaning it does not adjust for inflation. A 5% increase in retail sales during a period of 4% inflation represents only 1% real growth in the volume of goods purchased. During the 2022-2023 period, nominal retail sales growth looked healthy but was significantly overstated by the fact that consumers were paying higher prices rather than buying more. Adjusting for inflation revealed that real goods spending was essentially flat, a much less optimistic signal than the nominal numbers suggested.

Market reactions to the retail sales report depend on the economic context. During periods when the Fed is worried about an overheating economy, a strong retail sales number is paradoxically negative for stocks (it implies more tightening ahead) and positive for the dollar. During recession fears, a strong number is positive for stocks (it suggests the consumer is resilient). This dual interpretation means traders must understand the prevailing macro narrative to correctly position around the release.