EMU: Retail Sales

Thu Jan 08 04:00:00 CST 2015

Consensus Actual Previous Revised
Month over Month 0.2% 0.6% 0.4% 0.6%
Year over Year 0.2% 1.5% 1.4% 1.6%

Retail sales were stronger than expected in November. Following an upwardly revised 0.6 percent monthly increase in October purchases again climbed 0.6 percent for their first back-to-back gain since May/June. Compared with a year ago volumes were 1.5 percent firmer, down just a tick from the rate at the start of the quarter.

Promisingly, the rise in headline demand reflected buoyancy in discretionary spending. Hence, excluding auto fuel, non-food purchases were 1.4 percent higher on the month after a 0.9 percent increase in October. That said, the latest advances came after a 2.1 percent slump in September. Elsewhere food, drink and tobacco sales rose 0.5 percent following a 0.1 percent reversal last time.

Regionally there were solid monthly increases in France (0.8 percent), Germany (1.9 percent) and Spain (1.0 percent). The steepest decline was in Finland (2.0 percent.

The latest figures leave average Eurozone sales in October/November 0.5 percent above their level in the third quarter when they edged up just 0.1 percent. Accordingly, the signs are that household spending probably had a positive impact on overall economic activity in the fourth quarter. However, while total output most likely expanded over the period the economy still looks to have ended the year on a sluggish note. Coming after quarterly rises in real GDP of just 0.1 percent and 0.2 percent in the second and third quarters respectively, much more will be needed from the consumer sector if growth is to achieve any real momentum in 2015.

Retail sales measure the total receipts at stores that sell durable and nondurable goods.

Retail sales are important indicators of domestic consumer demand and are monitored closely by analysts as an important input to GDP. If you know what consumers are up to, you will have a pretty good idea on where the economy is headed. Needless to say, that's a big advantage for investors. The data are available in both value and volume measures although the press release deals only with volume. In addition to the total, the initial report provides a limited breakdown that separately identifies food, drink and tobacco, and (excluding automotive fuel) non-food products. A more comprehensive dataset is only available with the following month’s release. Unlike the U.S. and Canada, auto sales are not included in the retail sales data.

The pattern in consumer spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth.

Retail sales not only give you a sense of the big picture, but also the trends among different types of retailers. Perhaps auto sales are especially strong or apparel sales are showing exceptional weakness. These trends from the retail sales data can help you spot specific investment opportunities, without having to wait for a company's quarterly or annual report.