Retail sales
Retail sales provide useful data and
information that is analyzed to reflect consumer spending in a given economy.
In determination of GDP using expenditure approach, consumption is a major
component in that particular economy. The rise of retail sales in a given
country, for instance America will increase the total consumption which
includes durables like gasoline, building materials, and automobiles and
non-durables. Therefore, an increase in the retail sales increases the GDP of
an economy and vice versa.
A rise in retail sales means that, room
will be created in stores and warehouses giving producers and manufacturers an
opportunity to increase their production. This will increase gross value of
output and definitely gross value added which will have a general rise in the
GDP.
Growth in the sales of durable goods
like automobiles tend to indicate economic growth but an unexpected increase is
usually an indicator of inflation. Therefore the article uses non-durable goods
to determine the increase of sales because it tends to be stable and can give
reliable data and estimates. Economists in some occasions exclude some
categories of commodities because they are volatile and may change prices for
reasons which have minimal effects on the economy.
The
Producer Price Index (PPI) is used to measure the average change over a period
of time in the prices that are received by the domestic producers for their output.
The PPI is somehow similar to Consumer Price Index (CPI) although it considers
rising prices from the producer side rather than the consumer. Therefore, it
can be used to predict inflation in a certain economy.
Increased consumer spending in a given
economy is therefore considered as an indicator of economic stability and
growth. These retail sales reports are so significant and reliable for making
crucial decisions in regard to the economy.
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