Understanding Retail Sales Data that Affects Forex Trading
Many forex traders utilize data and financial information in the trading they do.One of the economic data that is very influential on price movements is retail sales data. Information from retail sales is awaited by forex traders because this data includes indicators that have an impact on inflation rates and GDP.
Retail sales data is also a data that is highly highlighted by market participants, due to its enormous impact on the USD.
What is Retail Sales ?
Retail sales is an indicator that shows the amount of consumer spending at a time and this is an aspect that will drive economic activity. Thus retail sales data will play a role to determine the economic growth that occurs.
Now let’s look at a case in the United States, where about 70% of consumer spending comes from retail sales. When retail sales increase, this will increase GDP and the tendency of inflation. Things like this can happen because when people’s purchasing power increases, the economy will continue to grow and the velocity of money will continue to be maintained.
Simple Process in Retail Sales
When retail sales data increases, that means there will be more factory products sold. When the product produced by many buyers, the income earned by the factory will increase. Increased factory revenue made the company began to increase the salaries of its employees with the aim of spurring productivity and also expanding its business.
The development shown above is what shows economic growth in a country.
Specifically, retail sales can be interpreted as a percentage change in total from retail sales figures.
Various Types of Retail Sales
The first type is Core Retail Sales, wherein the automotive sector is not included because the automotive sales are too volatile compared to other sectors.
Then there is Retail Sales, where all sales sectors will be taken into account in this data including the automotive sector.
Durable Goods Consumen is one that specifically takes into account the sale of durable goods. 3 months is used as a benchmark and benchmark to determine the level of durability of goods.
Furthermore, there is a Consumen Non-Durable Goods that takes into account the purchasing power of consumers for goods that are less than 3 months in durability.
Retail Sales Data and Their Effects on Forex Trading
Retail sales have a pattern that is directly proportional to the level of economic growth, where increasing retail sales will trigger price increases. Likewise, when data has weakened, it will reduce the value of the currency. Broadly speaking, data released by retail sales will be the initial indicator of economic growth.
When retail sales data is better than expected, this will indicate economic growth in a country. When many manufacturing products are absorbed by the market, the company’s revenue will increase, then the company will increase the salaries of its employees, expand its expansion, and open more job opportunities. This process is a sign of economic growth in a country.
Good economic growth will reflect the strength of consumer purchasing power and this will tend to increase inflation. As the economy increases, this will lead to a stronger exchange rate of a country’s currency. Inflation that occurs will also make the Central Bank raise the benchmark interest rate.
In the opposite case, retail sales data which has decreased and smaller than expected is an indication of an economy that is slowing down. As this continues, this will cause the Central Bank to reduce interest rates and finally to liberate the exchange rate of a country’s currency.
Range of Time for the Release of Retail Sales Reports in Several Countries
- Australia (AUD): Australian Bureau of Statistics between 30 to 35 days after the end of the period
- United Kingdom (GBP): Office for National Statistics between 15 to 21 days after the end of the period
- United States (USD): United States Census Bureau between 14 to 25 days after the end of the period
- Japan (JPY): Ministry of Economy, Trade and Industry between 25 to 30 days after the end of the period
- European Union (EUR): Eurostat between 14 to 30 days after the end of the period
Benefits You Will Feel from Retail Sales Data
The benefit of retail sales data is that this data is released early in the month and you can compare the results released between the previous month and the new month that has passed.
While some weaknesses found in retail sales data is that there are often revisions that occur and when revisions usually have a large value and data that is very volatile and difficult to predict the trends that are happening.
Retail sales or retail sales data is an economic report which is one of the important indicators that measure current economic conditions. When this indicator experiences good growth, the economy will also experience improvement. Likewise when the indicator data deteriorates.
The main influence given by retail sales data on currency transactions is, when this data rises it will make the value of the currency strengthen. When data has decreased, the value of the currency will also decrease.
That is the information we can convey regarding retail sales. We hope the information presented above can provide many benefits to all of you who have read it.