EMU: Retail Sales

Wed Apr 08 04:00:00 CDT 2015

Consensus Actual Previous Revised
Month over Month -0.2% -0.2% 1.1% 0.9%
Year over Year 2.8% 3.0% 3.7% 3.2%

The upward trend in retail sales that began back in October last year came to at least a temporary halt in February. A 0.2 percent monthly fall was in line with expectations but still the first drop of any size since September 2014 and followed a downwardly revised 0.9 percent gain in January. Annual sales growth slipped from 3.2 percent to 3.0 percent.

However, headline weakness was concentrated in the food, drink and tobacco sector where purchases were down 0.8 percent on the month after a 0.9 percent increase last time. By contrast, excluding auto fuel, non-food demand expanded 0.1 percent, its fifth consecutive monthly advance. Fuel sales were off 0.4 percent.

Regionally February's reversal was led by Germany where sales slid 0.5 percent versus January although this only slighted dented the previous two months' cumulative 3.4 percent increase. Amongst the other larger countries Spain (minus 0.7 percent) had a poor period and France (0.0 percent) similarly failed to make any progress.

Despite the setback, February's data still leave average Eurozone volumes in the first two months of last quarter up a tidy 1.3 percent versus the October-December period and so continue to suggest that household spending will make a useful contribution to first quarter real GDP growth. Indeed, consumer confidence rose quite sharply in March if the EU Commission's survey is anything to go by so it may well be that February's dip in purchases proves short-lived anyway.

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.