Direct and Indirect Signals of Retail Sales

1. Direct and Indirect Signals/Retail Sales A key aspect of economics is the collection and analysis of the vast amounts of data generated throughout global economies. The interpretation of this data can provide important signals for the future direction of the economy. There are two forms of signals that arise from the various economic data that is collected. The first are direct signals, which measure the movement in what is being measured. These usually take the form of a given macro indicator. The second type of signal is an indirect signal. These can be based on the perceived causation or correlation between two indicators. Indirect signals occur when one variable will tell something about another facet of the economy. The main differences are that direct signals are attributable to a specific measurement taken. Indirect signals are not directly attributable to one variable; rather they are used to draw conclusions about one from the movement of the other. Retail Sales is a macro indicator that measures the amount of goods being sold each month in the United States. Since consumer expenditures generally make up about two-thirds of total gross domestic product, it is an extremely important indicator in that the activity can reflect the health of the economy. Given the amount of data available from the monthly retail sales figures, it offers a wealth of information for both the retail industry as well as the economy as a whole. This information provides both direct and indirect signals for the potential direction of future economic data. Retails sales data provides direct signals about the current activity levels within certain sectors of the economy as well as the industry in total. It measures the change in the level of sales on a monthly, annual and year-to-date basis. When the information is collected and analyzed over a period of time, such as three months, it can show both positive and negative trends that might be