What Does the Core Retail Sales Number Mean?

What Is Core Retail Sales?

Core retail sales is an economic indicator that tracks the month-to-month increase or decrease in U.S. consumer spending in most retail categories. Two monthly retail sales numbers are commonly reported by the financial news media:

Together, core retail sales and retail sales give economists and investors a sense of the direction of the U.S. economy.

Understanding Core Retail Sales

Consumer spending accounts for more than two-thirds of the U.S. economy. That makes the core retail sales number (and the more comprehensive retail sales numbers) important indicators of the health of the overall economy.

The retail sales number is based on a comprehensive report released monthly by the Census Bureau, which is a division of the U.S. Department of Commerce. The data are released in the middle of each month for the preceding month, as in this example released in mid-December 2020 reported on sales in November 2020. The report was summarized in a press release at the same time.

Investors and economists watch the numbers to see whether retail sales are going up or going down, and by how much.

The data also are used extensively by various government bureaus. The numbers go into the calculation of the gross domestic product (GDP), are used to develop consumer price indexes, and help to analyze current economic activity. The Federal Reserve uses the numbers to assess recent trends in consumer purchases.

Various nations and their statistics bureaus compile retail sales data differently.

What the Core Retail Sales Number Means

Very strong or very weak retail sales can put upward or downward pressure on prices. As retail sales surge, upward pressure on prices may eventually take hold, especially if the numbers continue to rise month after month.

The opposite is true when sales plummet for a prolonged period. Prices are slashed as consumers spend less. 

Core Retail Sales vs. Retail Sales

Estimates of monthly retail sales data are collected and compiled as the Monthly Trade Report of the U.S. Census Bureau. This data measures total retail spending across the nation. The monthly rate of change is expressed as a positive or negative percentage. The data covers sales for durable and non-durable goods at the retail level.

The Census Bureau releases retail sales data for both month-over-month (MoM) and year-over-year (YoY) percentage changes. MoM data is the most important of the two as it is more likely to alert watchers to an unexpected trend in the making. Markets are also more likely to react to deviations from expectations in these numbers.

The COVID-19 Effect

The Census Bureau continued to gather data on retail spending throughout the COVID-19 pandemic impact. A statement on its website assures users that the quality of the data continued to meet its standards for publication despite the disruption to the economy.

It continued to use its standard weighting and estimation methods to calculate its estimates. That is, if a retail business reported zero sales for the month, that zero was added to its calculations.