Mgmt504: Microeconomics - Market Moving Indicators

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C. Importance: Since retail sales is half of consumer spending, retails sales is a key indicator of how the economy is performing. Retail sales reports get a lot of press. It's an indicator that is easy to understand and relates closely to the average consumer.

Interpretation: Strong retail sales are good for stock markets and in particular for the retail stocks, whereas this could cause investors to sell bonds. Similarly weak retail sales might be good for bond market but might be bearish for the stock market. Since any price changes affect the real value of retail sales.

Since retail sales are highly volatile, a three month average of the month over month changes will give more accurate representation.

Analysts and economists will take out volatile components to show the more underlying demand patterns. The most volatile components are autos, gas prices and food prices.

A. Current values released in the 3/12/2015 for the month of February are a decline of 0.6 % for month over month change. The retail sales less autos had a month over month decrease of 0.1%. Change in retail sales excluding automobile and gasoline sales had a decrease of 0.2% over the previous month.

B. The current values of the indicator are lower than the consensus range indicating that the markets were unfavorable.

C. Trends in the indicator over time: Retail sales in February dropped by 0.6 percent while it dropped 0.8 percent in January. Retail sales excluding auto sales declined by 0.1 percent in February while the decline was 1.1 percent in January. Retail sales in January and February were less due to lower gasoline prices. About two third of the time, changes in monthly sales are between +1 and – 1 percent. During other time the excessive increase or decrease is caused by changes in consumer spending on motor vehicle sales. Month over month change in the retail sales are more impulsive than the year-year sales.