The US Census Bureau’s retail sales figures are based on a random sampling survey of approximately 5,000 retail and food services firms whose sales are then weighted to represent the complete universe of over three million businesses. Responding firms account for approximately 65 percent of the dollar volume estimate. The statistic is an advance measure of overall retail sales, and is important for those interested in the demand side of the economy.
The Census Bureau’s estimate of retail and food services sales for July, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $439.8 billion, unchanged from June but up 7.3 percent from a year ago. Total sales so far this year are up by 3.7 percent from the same period a year ago, suggesting that demand is outpacing inflation, and is reflective of the approximately 2.0 percent growth being measured by the GDP.
Non-store retailers (or internet and catalogue sales) were up 6.7 percent on the year and auto sales are booming, up 8.1 percent so far this year over 2013. At the same time, hobby and sporting goods stores, and department stores suffered sizable declines in sales off 4.2 and 3.1 percent respectively from the prior year. Gasoline stations sales are also down on the year, but this generally reflects fuel prices rather that consumer demand.
While extremely important for many mainstream economists, the retail sales figures say little about production or whether the overall economy is strengthening. They do suggest that outside of purchasing new cars American’s shopping behavior is gravitating toward general staples like food (which of course is good for grocers). One good sign for the economy; however, is that restaurant sales are up faster than inflation, at 4.6 percent so far this year. Restaurant sales are generally thought of as a more discretionary food purchase, and rapid growth in these sales suggests that consumers are beginning to spend somewhat more freely.
While retail sales are a sign of current economic activity, rather than future prospects, they are also used by the Bureau of Economic Analysis as a proxy for measuring GDP. As such, one can expect that GDP will rise in line with retail sales – or at a rate of about 2 percent in the next quarter. This suggests that the economy will continue to be sluggish, and without some sort of exogenous (or external) effect, like a change in tax policy, or some significant new invention, there will be continued pressure on prices, wages and jobs.
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