Statistics: What Retail Sales Signal
Updated 2/12/20, Posted 11/1/13
By Jean Regan, President & CEO
In this seven part series, I’m focusing on different commonly referenced indicators and explaining their impact. These indicators are (1) the unemployment rate, (2) the inflation rate, (3) housing sales and starts, (4) the Federal Reserve’s Monetary Policy, (5) retail sales, (6) ISM non-manufacturing and manufacturing index, and (7) GDP growth.
For anyone whose work involves logistics, retail sales is one of the most important metrics to track. There would be no reason to send a van, truck or train to deliver goods if there wasn’t a person on the other end to make the purchase. Retail sales metrics illustrate trends about where people have been making purchases and provide an idea of what to expect ahead.
How do you define retail sales?
Retail sales is both what it sounds like - sales made by a retailer - and a key economic indicator. It covers all the physical items a person could purchase in a store or online, and excludes service items like a haircut or lawn care.
Many businesses publish their own reports about sales, and the U.S. Census Bureau publishes reports that conglomerate what’s happening across all the different retail businesses in America. The most commonly referenced of these is the “Advance Monthly Retail Trade Report” which comes out about two weeks after each month has closed. This report is based on a sample rather than complete data in order to make it one of the timeliest economic indicators. The final report comes out a month later, and these both can be found at http://www.census.gov/retail/.
What do retail sales mean for the economy?
Retail sales are a large part of America’s gross domestic product and an extended drop off can trigger a recession by forcing companies to reduce staff. The reverse is true as well – an increase in sales often leads to increased hiring and increased purchasing.
When looking at retail sales data, it’s important to compare figures to the year before, rather than just the month before, in order to account for the seasonality of consumer-based retail.
It’s also important to remember that changes of even a few billion dollars may not be significant in the larger scheme of the U.S. retail sales industry – reports of a particular company or industry having a large drop-off may not be as significant as it could initially seem.
What do retail sales mean for the logistics industry?
The logistics industry is highly related to retail sales. Shippers adjust the amount of inventory they produce and ship based on the changes in demand for their products. Trucking companies are less likely to hire additional staff if there’s a downward trend in retail sales overall or within an industry they specialize in. If your sales are growing while competitors are falling and carriers are cutting back, you may have to seek out new or additional ones.
As the percentage of online purchases continues to climb, retailers have greater need for parcel services and less need for LTL and TL shipments. Omni-channel retailing and the advent of same-day delivery are posing great challenges for shippers.
The current pace of the U.S. economy leaves many people wondering about what’s ahead. Although the future will always be uncertain, a good way to know more and wonder less is to follow pivotal economic indicators like retail sales.
How have you seen retail sales influence the logistics industry? Are there any tools you use to keep an eye on retail sales? Comment below to share.