Retail Sales and Control Group Analysis
What Retail Sales Measures
The Census Bureau's Advance Monthly Retail Trade Survey captures sales at retail and food services establishments—approximately \00 billion monthly. It is the most timely hard data on consumer spending.
What it includes:
- Store-based retailers (grocery, clothing, electronics, etc.)
- Online retailers (e-commerce)
- Food services and drinking places
- Motor vehicle and parts dealers
- Gas stations
What it excludes:
- Services spending (healthcare, housing, travel)
- Business-to-business sales
The point is: Retail sales covers about one-third of total consumer spending. Services spending (not captured here) represents the remaining two-thirds.
The Headline Number and Its Limitations
The headline retail sales figure reports total sales, including volatile components:
| Component | Volatility Level | Issue |
|---|---|---|
| Auto sales | High | Lumpy purchases; incentive-driven |
| Gas station sales | High | Reflects price changes, not volume |
| Building materials | Moderate | Weather-sensitive |
| Food services | Moderate | Pandemic-era volatility |
Worked example (October 2024):
- Headline retail sales: +0.4% month-over-month
- Ex-autos: +0.1%
- Ex-autos and gas: +0.1%
- Control group: +0.7%
The control group showed stronger underlying spending than the headline suggested.
Why the Control Group Matters
The retail sales control group excludes:
- Auto dealers
- Gas stations
- Building materials
- Food services
Why these exclusions:
- Autos and gas: Too volatile for trend analysis
- Building materials: Feeds into residential investment, not PCE
- Food services: Treated separately in GDP accounting
The critical point: The control group feeds directly into the Bureau of Economic Analysis's estimate of goods consumption in GDP. When forecasting GDP, the control group is what matters.
GDP relationship: Control Group Growth → Goods PCE Estimate → GDP Consumption Component
Month-Over-Month vs. Year-Over-Year
| Comparison | Best For | Limitation |
|---|---|---|
| Month-over-month | Trend changes, turning points | Noisy; seasonal adjustment issues |
| Year-over-year | Broader trend | Lags turning points; base effects |
| 3-month annualized | Balance of timeliness and stability | Still affected by outliers |
Worked example: If October retail sales are +0.4% month-over-month, the annualized rate is approximately (1.004)^12 - 1 = 4.9%. This translation helps compare to annual GDP growth rates.
Seasonal Adjustment Challenges
Retail sales data is heavily affected by:
- Holiday shopping: November-December surge
- Tax refund season: February-March boost
- Back-to-school: August-September
- Amazon Prime Day and similar events: Timing shifts year-to-year
The practical point: The Census Bureau's seasonal adjustment often struggles with shifting holiday calendars. Easter's timing (March vs. April) particularly affects monthly comparisons.
Key Categories to Monitor
| Category | What It Signals |
|---|---|
| Auto dealers | Big-ticket consumer confidence |
| Furniture and home furnishings | Housing market health |
| Electronics and appliances | Discretionary spending |
| Food and beverage stores | Staples demand (stable) |
| Nonstore retailers (e-commerce) | Secular shift to online |
| Restaurants and bars | Services vs. goods rebalancing |
Worked example: If electronics sales drop 3% while food store sales rise 1%, consumers may be trading down from discretionary to staples—a softening signal.
Nominal vs. Real Sales
The retail sales report is nominal—it reflects dollar amounts, not inflation-adjusted volume.
The adjustment: Real Retail Sales Growth = Nominal Growth - CPI Goods Inflation
Worked example:
- Nominal retail sales: +0.4% month-over-month
- CPI goods: +0.2% month-over-month
- Real retail sales: approximately +0.2%
The durable lesson: When inflation is elevated, strong nominal retail sales may mask flat or declining real spending volumes.
Revisions Pattern
The advance retail sales report is revised twice:
| Release | Timing | Typical Revision |
|---|---|---|
| Advance | ~15 days after month end | First estimate |
| Preliminary | ~45 days after month end | Often +/- 0.2% |
| Final | ~75 days after month end | Usually small |
The practical point: The advance release drives market reaction, but it is based on incomplete data. Wait for at least the preliminary revision before drawing firm conclusions.
Common Pitfalls
- Focusing on headline when autos or gas distort: Always check ex-autos and control group
- Ignoring the price vs. volume distinction: Nominal data can mislead
- Overreacting to single months: Retail spending is lumpy; use three-month averages
- Missing category composition: Strong headline can mask weak discretionary spending
Retail Sales and Recession Signals
During recessions, retail sales patterns typically show:
- Auto sales decline first (big-ticket deferral)
- Discretionary categories follow (electronics, furniture)
- Restaurants and bars weaken
- Staples remain relatively stable
The threshold to watch: Year-over-year real retail sales growth turning negative for three consecutive months has historically coincided with recessions.
Checklist for Retail Sales Day
Before the release (mid-month):
- Know consensus for headline and control group
- Note any known distortions (hurricanes, strikes, holiday timing)
- Check prior month's auto sales data (often released earlier)
After the release:
- Compare headline to control group
- Calculate real growth by subtracting goods inflation
- Check key discretionary categories
- Note revisions to prior two months
Next Step
Build a simple tracker comparing headline retail sales, ex-autos, and control group readings for the past 12 months. Identify months where the control group diverged significantly from the headline. Understanding these divergences builds intuition for what truly drives consumer spending trends.