The beginning of the supply chain includes commodities and other raw materials. Manufacturers create the product. The middle of the supply chain is wholesale sales. They distribute the goods and services to retailers. The retailers sell them to the consumer.
Retail and Its Primary Job
Retail accounts for almost 20% of annual sales for many retailers. For jewelers, it accounts for 70% of yearly sales. The holiday shopping season customarily begins on Black Friday, the day after Thanksgiving. It also includes other big shopping days, such as Cyber Monday, Green Monday and every other shopping day through Christmas. Some retailers have a “Christmas in July” sale to stir up sales during the slow summer season.
Measuring Sales and Trends
The U.S. Census Bureau measures retail sales with the monthly U.S. retail sales report. It reveals total sales, percentage change, and change in year-over-year sales. That means volatile gas and oil prices affect the results. That can be misleading. Gas prices typically rise in the spring. Traders bid up the prices in advance of anticipated demand for the summer driving season. When that happens, it seems like retail sales are skyrocketing. Sales seem to drop like a stone in the late summer or autumn. That’s when gas prices fall as vacationers return home.
Retail Categories
The Census Bureau divides retail sales into 13 categories. The largest category is auto and auto parts stores. Since it’s such a large component, the Census Bureau report also shows retail sales without auto. Here are all 13 retail categories:
Reflecting the Economic Environment
Retail sales tell you how much demand exists for consumer goods. That’s critical because consumer spending makes up almost 70% of total U.S. economic output. The three other components of gross domestic product(GDP) are business spending, government spending, and net exports. The Bureau of Economic Analysis releases the GDP report each quarter throughout the year. If each month’s retail sales are strong, then it’s likely that the GDP report will be solid as well. The only time that won’t be true is if prices are rising due to inflation. The retail sales report doesn’t adjust for inflation. The BEA’s report uses so-called real GDP, which does adjust for inflation. It’s worth also looking at year-over-year retail sales in addition to the monthly percentage changes. The GDP report gives an estimate for a year. Retail sales growth since the prior year will give you a better indication of GDP growth which is also compared to the prior year.
