EMU: Retail Sales

Wed Mar 04 04:00:00 CST 2015

Consensus Actual Previous Revised
Month over Month 0.4% 1.1% 0.3% 0.4%
Year over Year 3.7% 2.8% 3.1%

Retails sales (ex-autos) were significantly stronger than expected in January. A 1.1 percent monthly rise was the fourth increase in a row, the sharpest since May 2013 and followed a slightly firmer revised 0.4 percent gain in December. Annual growth of purchases climbed from 3.1 percent to a multi-year peak of 3.7 percent.

Additionally, January's bounce was not attributable to the more volatile sectors as, ex-auto fuel, non-food buying was up fully 1.2 percent versus year-end, its second monthly advance in excess of 1 percent since October. Food, drink and tobacco sales were 1.0 percent firmer following a 0.2 percent advance last time.

Regionally the monthly headline spurt was led by Germany where sales jumped fully 2.9 percent but there were especially large gains too in Latvia (1.7 percent), Luxembourg (1.3 percent), Portugal (6.8 percent) and Slovenia (2.4 percent). The only reported falls were in Ireland (0.1 percent) and Lithuania (0.5 percent).

Overall retail sales in January were some 1.6 percent above their fourth quarter average. Their trend rise is consistent with the steady improvement seen in consumer confidence in recent months and the same indicator pointed to further growth in February. As ever with the sales data the potential for sometimes sizeable revisions means that one month's worth of data may not mean much at the end of the day but recent developments have been genuinely promising. The majority of the ECB Council should be in a much happier frame of mind at tomorrow's meeting.

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.