U.S. Retail Sales: Dec. 2012 Preview

by: James Picerno

Tomorrow's report on retail sales for December (8:30am eastern) is projected to show a 0.3% gain for the month, according to The Capital Spectator's average econometric forecast. That's slightly higher than the 0.2% consensus forecast from several surveys of economists. In November, retail sales rose 0.3%, the government reported last month.

Here's a closer look at the numbers, followed by brief definitions of the methodologies behind The Capital Spectator's projections:

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R-2: A linear regression model using two variables--an index of weekly hours worked for production/nonsupervisory employees in private industries and the stock market (S&P 500) -- to predict retail sales. The computations are run in R.

ARIMA: An autoregressive integrated moving average model that analyzes the historical record of retail sales in R via the "forecast" package.

ES: An exponential smoothing model that analyzes the historical record of retail sales in R via the "forecast" package.

VAR-6: A vector autoregression model that analyzes six economic time series in search of interdependent relationships through history to predict retail sales. The forecasts are run in R with the "vars" package using historical data for the following indicators: US private payrolls, industrial production, index of weekly hours worked for production/nonsupervisory employees in private industries, the stock market (S&P 500), disposable personal income, and personal consumption expenditures.