Retail Sales

3
Underlying value was $2.1T (-0.71% yoy) for Q2 2024 as of August 20, 2024

Status 🚦

  • Score: 3
  • Underlying value: $2.1T (-0.71% yoy) for Q2 2024
  • Last updated: August 20, 2024

Scoring method: We look at the 12-month Percent Change in Quarterly Retail Sales, Adjusted for Inflation and: (1) Check if sales are equal or declining in comparison to the same quarter in the previous year (i.e. year-over-year change is 0% or less). (2) Evaluate the trend over the last 8 quarters. We use quarters because it helps smooth out noise created by monthly fluctuations. We adjust for inflation to evaluate real growth rather than inflation-driven growth.

Current score reason: Retail sales have declined in the current quarter relative to 1 year ago. They've generally been in mild decline for 7 quarters. However, they've also been relatively stable during this period (no substantial deceleration). This follows a massive increase in retail sales from 2021 through the beginning of 2022 (related to impacts of COVID).

Description 📝

Retail sales measures the total amount of money consumers are spending on finished goods. Consumer spending is a key economic activity. Increases in spending tend to lead to economic expansion. Decreases in spending tend to lead to economic contraction.

Use as a recession indicator 🤔

Reduced spending results in reduced sales for businesses. Declining sales at businesses leads to elimination of jobs. When people lose (or are scared of losing) their jobs, they spend less money. This negative cycle between spending and employment characterizes economic downturns. Thus, retail sales is an indicator of an economy's direction.

History 📚

In the 1930's, the U.S. Department of Commerce begain collecting retail sales data to help inform policy decisions. In 1951, the U.S. Census Bureau launched the Monthly Retail Trade Survey. This was one of the first systematic efforts to regularly collect U.S. retail sales data. In 1953, the Census Bureau introduced seasonally adjusted data to help smooth out fluctuations and provide a clearer picture of underlying trends. The survey and related reports have continued to advance over time and remain a primary source of U.S. consumer spending data today.

Performance ⚖️

Deceleration in consumer spending has preceded or coincided with all recessions since 1948. However, there've been numerous periods of deceleration that weren't immediately followed by a recession (false positives). If we expand our evaluation criteria to combine both deceleration and year-over-year declines in spending, 11 out of 12 recessions are identified, but with only 2 false positives.

Additional info