What Do Chain Store Sales Tell Us about Consumer Spending?

[...]This study is the first comprehensive examinationof the value of chain store data as macroeconomic indicators.2 We begin by considering important structuralchanges in the retail sector and their implications for interpretingthe chain store data. We then turn to formal statisticaltests of the linkages between chain store data and theofficial measures of overall retail sales and personal consumptionexpenditure.Our empirical tests provide mixed support for theuse of chain store data. On the one hand, we find thatweekly indexes and monthly reports from individual companiesare too erratic to be useful for forecasting. On theother hand, we find that monthly chain store indexes, ifgiven the appropriate weights in forecast models, add significantlyto the accuracy of in-sample and out-of-samplepredictions for several measures of consumer spending.Overall, models that combine economic variables with thetwo major chain store indexes provide the best forecasts.[...]