Improve Your Trading With Retail Sales, PPI, PMI, and Other Fundamental Announcements

May 22, 2020
A retail sales report is a fundamental metric used to determine the spending patterns of consumers in a country. This post discusses how investors can use retail sales and other fundamental announcements to improve their trading.
Improve Your Trading With Retail Sales, PPI, PMI, and Other Fundamental Announcements

Every month, economic analysts, investors, and traders have their eyes set on the fundamental reports published by the Office for National Statistics (ONS) to determine the current and future direction of the economy.

Some of these reports include the UK retail sales data, producer price index, purchasing managers index, and other economic indices.

For years, the retail sales index has largely become one of the essential measures of the economic status of the UK. Today, the UK retail sales index shows how businesses of all sizes impact the country’s economy.

But what is the retail sales index, and how can traders use retail results and other reports to improve their trading?

In this post, you will find information expounding the retail sales meaning, with a highlight of how various fundamental reports can be used to improve your trading.

Retail Sales Definition

fundamental analysisA retail sales report is an economic metric used to track the spending patterns of consumers by measuring the value of goods sold by retailers. However, the retail figures captured in the retail index report do not reflect the country’s total consumption in each month.

This is because retail index statistics are exclusive of money spent on services, such as healthcare. The retail statistics UK published by the ONS are generated by sampling a set of 5,000 retailers, reflecting the status of the over 200,000 players in the sales retail industry.

What is the Importance of Retail Sales to Traders

Trading in the forex market is entirely driven by data, and the retail sales figures have a significant impact on the decision of every trader.

One of the primary reasons why traders and government agencies rely on retail sales UK data is because the metric is a crucial component in determining the GDP of the economy. Due to its significance in impacting the status of the country’s economy, the retail index is prone to receiving extensive media coverage globally.

How to Use Retail Index to Improve Your Trading

Although the retail sales value cannot be solely used to speculate the forex market, you can use the index to improve your trading output significantly. Here is how the published retail and sales report can impact your trading decisions.

• Speculating Market Volatility

retail salesFor every trader, market volatility is one of the most important indicators in deciding on whether to open or close a position. Being able to speculate market volatility is, therefore, a crucial aspect for a savvy investor.

The publication of a retail report creates volatility in the financial markets, influencing the value of securities in the market. If the market prices move towards a favourable direction, investors can generate significant yields from a trade.

• Determining Consumer Confidence

The data on sales in retail indicates whether consumers are spending on goods in the same degree as before. Stagnation in the growth of consumer spending could be a sign of an upcoming recession.

This information enables traders to decide on the securities to avoid and the right investment strategies to apply for a given economic phase.

• Tracking the Consensus Estimate

The average of the estimated performance of a given security by analysts is known as consensus estimate or street consensus. If the sales report differs from the consensus estimates, then a negative ripple effect will be felt in the market.

The report, therefore, is an essential tool against which the consensus estimates can be measured.

What is the Importance of the Purchasing Managers’ Index (PMI) to Traders?

profit calculatorPMI is a survey of companies in the private sector, especially the service and manufacturing sectors. PMI is a key indicator of the economic conditions of a country, and investors can use this metric to speculate the direction of an economy.

This is because PMI reflects how the private sector is coping in the country’s business environment.

In Summary

When undertaking fundamental analysis on the market, traders must consider various fundamental announcements, including retail sales index and PMI.

The data from the announced reports have significant implications in trading markets. Therefore, you should not allow data from these reports to pass you without consideration and due thought.

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Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances or needs.

Risk Warning: Our products are traded on margin and carry a high level of risk and it is possible to lose all your capital. These products may not be suitable for everyone and you should ensure that you understand the risks involved.

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