U.S. August retail sales preview:

U.S. retail sales statistics for August will be released at 12:30 GMT, today.

Why retail sales and U.S. consumers are important?

• Domestic consumption of goods contributes about 25% of GDP or around $ 4.3 trillion as of 2015. Among these Durable goods such as vehicles, furniture accounts for only $1.4 trillion. Buying of non-durables such as food, clothing account for $2.9 trillion.
   
• Moreover, services, which is not covered by retail sales account for 45% of the GDP and mainly consumed at home.

Past trends –

• Retail sales, as well as, personal consumption expenditure have been growing in last few years. FOMC in its last statement called personal income growth as robust. However, expenditure has remained weak compared to income.

• Except for growing 0.9% in March, 1.2% in May and 0.6% in July, retail sales have remained subdued throughout 2015. In four months last year growth has been negative.

• Even in 2016, the numbers were very weak.  February and March were negative. However, it has somewhat bounced back since April, when it grew by 1.3 percent, followed by 0.5 percent in May and 0.6 percent in June. But in July, retail sales didn’t grow at all and excluding the autos, it was down by 0.3 percent.

Expectations today –

• Today it is expected to decline by 0.1 percent but grow by 0.2 percent when auto sales excluded.

Impact –

• Despite the weakness in the data in August and the possibility that the Federal Reserve will not hike rates in September, the dollar has performed well against major trading counterparts. Today’s retail sales if surprise to the downside could dent the strength of the dollar, however, it is important to note that expectation is already on the downside, so any surprise could be limited.