Tracking U.S. Consumers in Real Time with a New Weekly Index of Retail Trade
51 Pages Posted: 2 Jun 2021 Last revised: 5 Nov 2021
Date Written: November 5, 2021
We create a new weekly index of retail trade that accurately predicts the U.S. Census Bureau's Monthly Retail Trade Survey (MRTS). The index's weekly frequency provides an early snapshot of the MRTS and allows for a more granular analysis of the aggregate consumer response to fast-moving events such as the Covid-19 pandemic. To construct the index, we extract the co-movement in weekly data series capturing credit and debit card transactions, foot traffic, gasoline sales, and consumer sentiment. To ensure that the index is representative of aggregate retail spending, we implement a benchmarking method that uses a mixed-frequency dynamic factor model to constrain the weekly index to match the monthly MRTS. We use the index to document several interesting features of U.S. retail sales during the Covid-19 pandemic, many of which are not visible in the MRTS. In addition, we show that our index would have more accurately predicted the MRTS in real time during the pandemic when compared to either consensus forecasts available, monthly autoregressive models, or other commonly-cited high-frequency data that aims to track retail spending. The gains are substantial, with 50 percent or more reductions in mean absolute forecast errors.
JEL Classification: C32, C38, C43, C53, D12
Suggested Citation: Suggested Citation