Retail Sales: Definition, Measurement, and Why It Matters

Key takeaways

• Retail sales measure consumer purchases of finished goods and are a primary indicator of consumer demand.
• The U.S. Census Bureau compiles monthly retail sales data from retailers and food-service outlets.
• Analysts often exclude volatile categories such as autos and gasoline to better gauge underlying consumer trends.
• Retail sales influence markets (stock and bond prices) and provide insight into inflationary pressures and overall economic health because consumer spending is a large share of GDP.

What are retail sales?

Retail sales track the dollar value of goods and services purchased by consumers from retailers and food-service establishments over a defined period (typically a month). The metric includes in-store and out-of-store sales and covers both durable goods (last more than three years) and non-durable goods (shorter-lived items).

How retail sales are measured and reported

• Collected through the U.S. Census Bureau’s Monthly Retail Trade Survey and released monthly (usually mid-month) for the prior month.
• Based on sampling from a range of retail sectors and extrapolated to represent national activity.
• Figures are often shown both including and excluding auto and gasoline sales; many economists prefer the exclusion version to reduce volatility.

Categories commonly included

Examples of retail categories in the report:
* Clothing and clothing accessories
* Pharmacies and drug stores
* Food and beverage stores
* Electronics and appliance stores
* Furniture stores
* Gasoline stations
* New car dealers

Special considerations

• Seasonality: Retail sales spike during holiday periods (e.g., year-end shopping), so analysts compare month-over-month and year-over-year changes to account for seasonal effects.
• Price effects: Large swings in food and energy prices can inflate or depress nominal sales without reflecting changes in physical quantities sold.
• Volatile components: Auto and gasoline sales can swing widely due to price and timing; excluding them often provides a clearer picture of underlying consumer demand.

Economic significance

• Leading indicator: Strong retail sales typically signal economic expansion and can boost equity markets (retailers’ earnings prospects).
• Inflation signal: Rapid growth in nominal retail sales can reflect rising prices, indicating inflationary pressure; conversely, falling sales can signal slowing demand and downward pressure on inflation.
• Links to GDP: Consumer spending (personal consumption) accounts for a substantial portion of GDP, so retail sales are a crucial input for gauging overall economic activity.

How inflation affects retail sales

When inflation rises, consumers often curtail discretionary spending and prioritize necessities, which can reduce real (inflation-adjusted) retail volumes even if nominal sales rise.

Bottom line

Retail sales are a timely, high-frequency gauge of consumer demand and economic momentum. Interpreted alongside inflation measures and exclusions for volatile categories (autos and gasoline), the retail sales report helps analysts, investors, and policymakers assess the economy’s direction.

Sources

• U.S. Census Bureau — Monthly Retail Trade Survey / Advance Monthly Sales for Retail and Food Services
• U.S. Bureau of Economic Analysis — Durable and Nondurable Goods definitions