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Retail sales, RS is an important fundamental index rendering change in the volume of retail sales. In other words, the index shows consumer demands and expenses for goods of various categories. It is directly related with GDP. RS is measured as percentage and is compared to previous value, as a result, a new dynamic of index change is set.
To calculate index, 5000 retail companies of following trade categories are researched:
Durable Goods:
- construction materials
- furniture
- cars
- equipment etc.
Nondurable Goods:
- petrol
- food and beverages
- clothes and shoes
- beauty care products
- books and CDs
- medicine etc.
Very often car sales are not accounted for RS measurement, because this value is very inconsistent and can distort the result. Therefore, the indicator is divided into “car sales” and “sales of all the rest”.
Retail sales index is published for previous month by the Department of Commerce, U.S. Census Bureau at 08:30 a.m EST (New York). Date of publication: middle of the month. If RS value changes for more than 0,4 % in comparison with the previous period, market can noticeably react this index.
Growth of indicator indicates increase in manufacture of goods that is positive for economy and national currency. But it should be accounted that retail sales are related with seasons and trade cycles. Thus, for example, on the threshold of Christmas, demand of goods dramatically grows, therefore, index is always corrected in such periods. That is why RS is characterized as coincident indicator – coinciding with fluctuations of trade cycle at that moment.
Retail sales index is often correlated with other fundamental indicators such as Consumer Confidence Index, Consumer Price Index, data on Car Sales, Personal Income etc. Apart from that, policy of the Federal Reserve System greatly impacts on retails sales.
Following disadvantages of the index can be noted:
1. Data on personal spending is rather variable (volatile) and is always reconsidered, thereby complicating the process of forecast.
2. The index only reflects spending on goods and does not account for service expenses, which are estimated in the USA as rather more expensive.
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