EMU: Retail Sales

Wed Feb 04 04:00:00 CST 2015

Consensus Actual Previous Revised
Month over Month 0.0% 0.3% 0.6% 0.7%
Year over Year 2.0% 2.8% 1.5% 1.6%

Retail sales closed out 2014 on a slightly stronger than expected note. A 0.3 percent monthly rise in volumes followed a marginally larger revised 0.7 percent advance in November to lift annual growth of purchases from 1.6 percent to 2.8 percent, its best performance since the recovery in household demand started back in early 2013.

Overall retail sales have now risen each month since September and the latest figures make for a fourth quarter increase of fully 0.9 percent versus the July-September period when purchases edged up just 0.1 percent. Promisingly, the recent pick-up has been largely attributable to discretionary spending as, excluding food and auto fuel, sales have climbed almost 3 percent since the end of the third quarter. Over the same period, food, drink and tobacco purchases gained only around 0.5 percent.

Regionally it was the usual mixed bag with strong monthly increases in Ireland (1.8 percent), Spain (1.1 percent), Austria (1.6 percent) and Slovakia (1.1 percent) contrasting with hefty falls in Estonia (1.7 percent), Latvia (1.3 percent) Portugal (3.8 percent) and Slovenia (1.5 percent). Amongst the other major economies, sales rose 0.5 percent in France and 0.2 percent in Germany.

Today's results are consistent with the modest improvement in consumer confidence seen in the EU Commission's survey over the last quarter. However, the same survey found little pick-up in consumer spending intentions which remain below their long-run average. To this end, what appears to have been a fairly respectable period for total household spending in the fourth quarter of 2014 may well not be repeated this quarter despite the sharp drop in fuel prices.

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.