Retail Sales in an Economy - Essay Example

The Macro Economy Retail sales in an economy represent the total sales which come from stores which deal in consumer retail items. Like other markets, there are large and small retailers as well as high ticket and low ticket items which may be bought or sold. However, the overall impact of retail sales is quite important in a macroeconomic sense since it shows the government how much people are willing to spend. It also ties in with the idea of consumer confidence about the economy since high retail sales show that consumers are willing to spend more and save less.

On the other hand, low retail sales can signify that consumers are bent towards saving for the future rather than enjoying the goods offered to them right now. The automobile industry is connected to other items which can be retailed by sellers but pure retail sales figures often do not include automobile sales. This is because automobile sales can vary sharply from month to month but the trends for automobile sales are connected to the trends for retail spending. A decreasing consumer price index would suggest that things are getting cheaper for the average consumer and s/he would be more inclined to spend out of his/her savings to make purchases which might otherwise be delayed for the future (BLS, 2006).

Spending is also linked to the GDP because one of the components of the calculations for the GDP of a country is the economic activity of its citizens. For example, American consumers who spend more money in a given year would add to the consumption figures and if other elements of the GDP (investment, government spending, exports and imports) remain the same then the GDP for that year can be expected to be higher than normal. Of course, a lower CPI could encourage spending and improve the GDP while a higher CPI would have the opposite effect (BLS, 2006).

Similarly, a country which has a very high employment rate gives consumers and producers the ability to generate more output from the economically active individuals in society. The producers, workers and craftsmen also become consumers and spend out of their earnings which help the economy maintain a balance and also allow a welfare state to operate to its fullest capacity.