Exploring Economic Indicators: Retail Sales, Industrial Production, Leading Economic Index

Economic indicators provide insight into the overall health and performance of an economy. They are essential tools for policymakers, advisors, investors, and businesses because they allow them to make informed decisions regarding business strategies and financial markets. In the week ending June 20, the SPDR S&P 500 ETF Trust (SPY) rose 0.84%. The Invesco S&P 500 Equal Weight ETF (RSP) was up 0.39%.

In this article, we look at three closely watched indicators from the past week – retail sales, industrial production, and the Conference Board’s Leading Economic Index (LEI). These indicators might seem unrelated at first. But they all have a significant role in assessing economic health and predicting economic trends. Retail sales and industrial production are among the “big four” recession-determining indicators recognized by the National Bureau of Economic Research (NBER). Furthermore, the LEI serves as a forward-looking indicator. It offers insights into whether the economy is headed toward expansion or recession. Since the end of 2022, there have been ongoing talks around a forthcoming recession, though one has not materialized. These indicators, among others, will remain an important part of the ongoing discussion.

Retail Sales

American consumer spending is off to a slower-than-expected start for 2024. That's because Americans are continuing to grabble with inflation and elevated rates. Retail sales inched up 0.1% in May, lower than the anticipated 0.3% growth. Additionally, April’s data was revised lower, revealing consumer spending declined 0.2% compared to the initial flat estimate. Consumer spending picked up in a handful of sectors. Those were led by sporting goods, hobbies, musical instruments, and bookstores (2.8%), clothing stores (0.9%), motor vehicle dealers (0.8%), and electronics and appliance stores (0.4%). Meanwhile, most other sectors saw a drop in spending, specifically gas stations, which declined by 2.2%.

Core retail sales (excluding automobiles) were up 0.1% from April, falling short of the expected 0.2% growth. Lastly, control purchases, which is thought to be an even more “core” view of retail sales, were up 0.4% from April, as expected. This series typically does not garner as much attention as the headline and core figures. But control purchases are a more consistent and reliable reading of the economy because it strips out many volatile components.