What Is The Retail Sales Report And How Does It Impact Forex?
The Forex market is known as one of the most, if not the most, dynamic financial markets in the world.
Of course, this dynamism is one of its main attraction, as any trader can make any change favour him if played well, but it’s worth noting that it also means that the range of elements that can turn the tides is much greater.
The retail sales report is one of such elements, for it’s one of the most significant indicators of a country’s economic development.
Now it’s your time to learn what it is, what it does, and how to take advantage of it!
What’s The Retail Sales Report?
The retail sales report refers to the data collected from the purchases of goods by consumers in the retail establishment.
It’s important to note that the report does not include services such as travel, health, and any market outside of physical goods.
The report is born off receipts from random retailers around the US, and thus it comes shown in USD without adjusting for inflation. It also includes the percentage change in sales from previous months.
The retail sales report is divided into different categories depending not on the type of goods sold, but on the type of establishment. A common practice is to present a retail sales report without the sales corresponding to automotives, for it’s a very volatile market from month to month and it usually distorts the general view.
Three retail sales reports are released as follows:
- An advance report is published monthly, with around 5,000 retailers polled, but with less than half responding in-time. It’s released anyways as crude data for reference.
- The second one is the preliminary version, with 8,000 additional retailers polled.
- Lastly, the final revision is released four weeks later, with the 13,000 polled retailers combined. Generally, around 75% respond for the report.
Retail Sales And The USD: Why Should You Care?
Retail sales make up almost a quarter of all the economic activity in the US, so it’s easy to see how significant it is for the US economy and the USD in the Forex market.
It’s not hard to believe that higher retail sales numbers give bullish momentum to the USD, as interest rates tend to increase with stronger economic growth. However, if retail sales gets too “hot”, then it could also have a reverse effect and be bearish for the Dollar.
As many of the goods in the US are manufactured overseas, higher demand for these products also means higher demand for the currencies from the countries that make them, which can also be negative for the US Dollar at the expense of these other currencies.
The Shortcomings Of The Retail Sales Report
- Retail sales are seasonal: 20% takes place in December.
- Report advances contain incomplete data and can fail to provide an accurate picture of the economy.
- Retail services are vital for the US economy, so the retail sales report falls short when giving a full picture. That’s even more noticeable once you know retail services also include movies, haircuts, plumbing, transportation, and others, making up about two-thirds of an individual’s expenses.