The US Retail Sales m/m report measures the change in the total value of sales at the retail level across the United States from one month to the next. It is a critical indicator of consumer spending, which accounts for a significant portion of overall economic activity. The data is typically released about two weeks after the month ends by the U.S. Census Bureau.
An example of this would be if the Retail Sales m/m report shows a 0.5% increase for July compared to June. This indicates that there was a 0.5% rise in the dollar value of goods sold at the retail level during July.
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US Core Retail Sales:
Similar to the Retail Sales m/m, the US Core Retail Sales report also measures changes in retail sales values, but it excludes certain volatile categories such as automobiles, gasoline, building materials, and food services. This exclusion provides a clearer view of underlying consumer demand trends.
For example, if Core Retail Sales indicate a 0.3% increase while the broader Retail Sales show a 0.5% increase, the difference may largely be attributed to fluctuations in auto or gasoline sales.
Why Traders Should Care:
1. Economic Health Indicator: Retail sales are a primary indicator of consumer spending health, which drives much of the US GDP. Strong retail sales suggest a healthy economy, while weak sales can indicate economic challenges.
2. Fed Policy Influence: The Federal Reserve monitors retail sales closely when considering monetary policy adjustments. Significant deviations from expectations can impact interest rate decisions, influencing currency valuations.
3. Market Sentiment: Retail sales reports can significantly influence market sentiment. Better-than-expected results can boost stock markets and strengthen the USD as investors anticipate economic growth.
Impact on Markets and the USD:
- Stock Markets: Positive retail sales can lead to stock market rallies as companies anticipate increased revenues. Conversely, poor results might result in declines.
- USD Exchange Rates: A strong retail sales report generally supports the USD, as it suggests robust economic activity and the possibility of tighter monetary policy. Weak numbers could pressure the USD lower.
Tips for Traders During These News Releases:
1. Prepare for Volatility: Retail sales reports can cause significant short-term volatility in financial markets. Be prepared for quick price movements by setting appropriate stop-losses and take-profits.
2. Follow Expectations: Pay attention to market expectations and the consensus forecast ahead of the release. Large deviations from expectations often trigger the most substantial market reactions.
3. Look Beyond Headline Numbers: Consider both the headline and core figures. Sometimes, the core number provides more insight into the trend of consumer demand.
4. Consider Broader Context: Analyze the data in conjunction with other economic indicators and events. A single report is rarely indicative of broader trends without context.
5. Stay Updated: Use economic calendars to keep track of release times and analyst predictions. Ensure your information sources are timely and reliable to react swiftly.
6. Risk Management: Due to potential for rapid market movements, use proper risk management techniques to protect against unexpected outcomes.
By understanding these reports and their implications, traders can make more informed decisions and better navigate the complexities of the financial markets during these news events.
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