CA: Retail Sales

Fri Mar 20 07:30:00 CDT 2015

Consensus Actual Previous Revised
Month over Month -0.5% -1.7% -2.0% -1.8%
Year over Year 1.2% 4.0%

Retail sales got off to a very poor start this year. A 1.7 percent monthly decline was the second sizeable fall in a row and reduced annual growth of purchases from 4.0 percent to 1.2 percent, its slowest pace since March 2013. Volume sales fell 1.2 percent.

Within the overall nominal monthly drop, gasoline sales were off fully 8.8 percent due weakness in prices. Motor vehicle and parts dealers (minus 1.4 percent) also had a poor period as did food and drink (minus 1.2 percent), furniture and home furnishings (minus 2.1 percent), sporting goods, hobby, book and music stores (minus 5.3 percent) and general merchandise (minus 1.1 percent). The best performing subsector was electronics and appliances (3.8 percent) although clothing and accessories (1.5 percent) similarly performed well.

January's broad-based slide left overall sales some 2.8 percent below their fourth quarter average and so clearly bodes ill for the contribution of household spending to economic growth this quarter. Volume purchases might have held up a little better but with both merchandise exports volumes (minus 1.3 percent) and real manufacturing shipments (minus 1.0 percent) suffering sizeable monthly reversals too, the economy looks to have struggled to keep its head above water at the start of the year. BoC policy would appear to be on hold for now but another rate cut further down the road certainly cannot be ruled out.

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.