Economist and investors around the world say retail sales numbers can provide key insight into overall global economic health.
“Retail sales are considered a coincident indicator in that this activity reflects the current state of the economy,” explained Sohum Mehta, growth analyst with Taco Bell, a division of Yum! Brands.
“Retail sales data tracks the dollar value of merchandise sold within the retail trade by taking a sampling of companies engaged in the business of selling end products to consumers,” said Mehta.
In August, in the United States, retail sales were not up to par in comparison to the previous month, something the Wall Street Journal says could serve as an indication of the country’s current economic health.
Sohum Mehta agrees, saying these retail sales numbers and the personal consumption of individuals throughout the country do play a big role in the health of the economy.
“These retail sales figures give us insight into the coming months of retail economic activity,” said Mehta. “If these numbers are stalled or slowing, it could indicate the possibility of a recession.”
Despite reduced retail sales numbers in August, the Wall Street Journal also reports that retail sales in July held a trend of strong growth in consumer buying.
Economists are forecasting a 0.5 per cent growth in July’s retail sales, which would stay in line with June’s reported 0.6 per cent growth.
“If retail spending slows down or grows for an extended period of time, it can cause volatility in other markets, housing for example, and this will eventually play a role in global economic health,” added Sohum Mehta.
According to the National Retail Federation and a report conducted by Pricewaterhouse Coopers, there is no denying the power of retail sales in the U.S. economy, with the report stating that retail is the largest private employer in the country, contributing $2.6 trillion annually to the country’s GDP.
According to global chief economist for Vanguard, Joe Davis, August’s stalled retail numbers shouldn’t be cause for alarm, as the U.S. is still considered to be experiencing a sluggish economic recovery.
“Global growth has been frustratingly fragile,” said Davis. “In the last three years, it has been significantly lower than the cycle a decade ago, and there is litter acceleration in any economy of the world right now.”
According to Davis, this slow growth in retail sales numbers might not be a bad thing.
“Growth over the last six years has been two per cent to two-and-a-half per cent, compared to three-and-a-half per cent in the 80’s and 90’s. But this slower growth is more sustainable,” said Davis.
On a global scale, the U.S. remains in a better economic position than Europe and China due to a dramatic rise in private debt in both countries over the last decade and a decline in consumer debt in the U.S. since 2009.