Tracking U.S. Consumers in Real Time with a New Weekly Index of Retail Trade

44 Pages Posted: 2 Jun 2021 Last revised: 18 Jun 2021

See all articles by Scott A. Brave

Scott A. Brave

Federal Reserve Bank of Chicago

Michael Fogarty

Federal Reserve Bank of Chicago

Daniel Aaronson

Federal Reserve Bank of Chicago

Ezra Karger

Federal Reserve Bank of Chicago

Spencer D. Krane

Federal Reserve Bank of Chicago - Economic Research

Date Written: March, 2021

Abstract

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, mobility, gasoline sales, and consumer sentiment. To ensure that the index is representative of aggregate retail spending, we implement a novel 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 at the time, monthly autoregressive models, or other commonly-cited high-frequency data that aims to track retail spending. The gains are substantial, with roughly 50 to 75 percent reductions in mean absolute forecast errors.

JEL Classification: C32, C38, C43, C53, D12

Suggested Citation

Brave, Scott A. and Fogarty, Michael and Aaronson, Daniel and Karger, Ezra and Krane, Spencer D., Tracking U.S. Consumers in Real Time with a New Weekly Index of Retail Trade (March, 2021). FRB of Chicago Working Paper No. WP-2021-05, Available at SSRN: https://ssrn.com/abstract=3856381 or http://dx.doi.org/10.21033/wp-2021-05

Scott A. Brave

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States

Michael Fogarty

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States

Daniel Aaronson

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604-1413
United States

Ezra Karger (Contact Author)

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States

Spencer D. Krane

Federal Reserve Bank of Chicago - Economic Research ( email )

230 South LaSalle Street
Chicago, IL 60604-1413
United States
312-322-2382 (Phone)

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