EMU: Retail Sales

Wed May 06 04:00:00 CDT 2015

Consensus Actual Previous Revised
Month over Month -0.8% -0.8% -0.2% 0.1%
Year over Year 3.1% 1.6% 3.0% 2.8%

Retail sales matched expectations for a 0.8 percent monthly fall in March. Having seen February's drop revised away, the end of quarter decrease was the first since last September and enough to reduce annual workday adjusted growth of purchases from 2.8 percent to 1.6 percent, its slowest rate since November 2014.

March's monthly slide was roughly evenly split between food, drink and tobacco (0.6 percent) and non-food, ex-auto fuel (0.8 percent). Fuel sales were 2.7 percent lower, compounding their 1.0 percent fall in mid-quarter.

The headline decline was led by Germany where purchases were down fully 2.3 percent from their February mark but both France (minus 0.3 percent) and Spain (minus 0.2 percent) also had a poor month. The steepest drop was recorded in Portugal (3.5 percent) ahead of Slovenia (2.8 percent) while the best performer was Slovakia (1.1 percent) followed by Lithuania (0.8 percent).

March's setback followed a stream of tidy rises and should not be seen as the start of a new trend. Indeed, first quarter sales were still 0.7 percent higher than in the previous period when they expanded at a similar 0.8 percent pace. Growth would have accelerated but for another downward revision to the January rise (now just 0.4 percent) which, if nothing else, underlines the precarious nature of the initial estimates.

According to the EU Commission survey, consumer confidence dipped in April but was still close to its post-recession high and buying intentions rose. Against this backdrop, consumer spending should bounce back at the start of the current quarter.

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.