CA: Retail Sales

Fri Feb 20 07:30:00 CST 2015

Consensus Actual Previous Revised
Month over Month -0.4% -2.0% 0.4%
Year over Year 4.0% 4.8% 4.6%

Retail sales were very weak in December. A 2.0 percent monthly drop was much steeper than expected, the largest since April 2010 and easily more than reversed November's unrevised 0.4 percent November gain. Annual growth slowed to 4.0 percent from 4.6 percent in mid-quarter.

Falling energy prices, notably gasoline, contributed significantly towards the headline decline but underlying weakness was reflected in a still sizeable 1.3 percent monthly decrease in volumes.

Within the overall monthly nominal drop, declines were reported in nine of the eleven subsectors. Gasoline sales were fully 7.4 percent lower and autos and parts off 4.8 percent. Excluding these categories sales were 1.3 percent down from their November level.

The other main areas of weakness were electronics and appliance stores (minus 9.2 percent) and clothing and clothing accessories (minus 5.6 percent), However, decreases were also recorded in furniture and home furnishings (1.0 percent), building material and garden equipment and supplies (also 1.0 percent), general merchandise stores (2.0 percent) and sporting goods, hobby, book and music stores (1.3 percent). On the positive side, food and drink rose 1.0 percent and health and personal care was up 0.2 percent.

With solid monthly rises already reported in December merchandise export volumes (3.5 percent) and real manufacturing shipments (2.9 percent), the hefty decline in retail sales volumes somewhat spoils what was shaping up to be a decent rebound in real GDP at year-end. In any event, further falls in energy prices in 2015 have reinforced the BoC's dovish bias and another 25 basis point cut in March remains a strong possibility.

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

With consumer spending a large part of the economy, market players continually monitor spending patterns. Data are available both for total retail sales and those excluding autos and for 16 different store specializations. Since autos account for over 25 percent of retail sales, the sector can have a pronounced impact on overall sales given their volatility. Retail sales are used to estimate the goods portion of personal consumer expenditures in the quarterly GDP accounts, accounting for about 50 percent of the total.

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 apparel sales are showing exceptional weakness but electronics sales are soaring. 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.