EMU: Retail Sales

Wed Jun 03 04:00:00 CDT 2015

Consensus Actual Previous Revised
Month over Month 0.6% 0.7% -0.8% -0.6%
Year over Year 2.0% 2.2% 1.6% 1.7%

Retail sales rose a marginally stronger than expected 0.7 percent on the month in April, matching their largest increase since January 2014 and more than reversing March's slightly smaller revised 0.6 percent decline. Annual growth of purchases was 2.2 percent up from 1.7 percent last time.

However, the headline gain was dominated by a rebound in food, drink and tobacco where sales jumped a monthly 1.3 percent having contracted a cumulative 1.3 percent in February/March. More significantly, excluding auto fuel, non-food expanded only 0.3 percent. This failed to recover all of March's 0.5 percent decline but was still the third advance so far in 2015.

Regionally, April's improvement was led by Germany which recorded a 1.7 percent monthly rise following falls of 0.2 percent and 1.4 percent in February and March respectively. France (0.5 percent) and Spain (0.8 percent) also posted fresh gains. Elsewhere, Ireland (3.2 percent), Belgium (0.6 percent) and Estonia and Portugal (both 0.8 percent) similarly enjoyed a decent month.

April's pick-up leaves overall Eurozone volumes 0.3 percent above their first quarter average and suggests that sales have got off to a decent start this quarter. That said, consumer confidence slipped in May according to the latest EU Commission survey so prospects for the rest of the quarter are somewhat clouded. Still, what appears to be an increasingly well-established uptrend in spending should ensure that households make a positive contribution to second quarter real GDP growth.

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.