CH: Adjusted real retail sales

Thu Jul 16 02:15:00 CDT 2015

Actual Previous
Y/Y % change -1.8% 1.6%

Retail sales were weak in May, falling 1.4 percent on the month after a much shallower revised 0.9 percent increase in April. Annual workday adjusted growth dipped back into negative territory at minus 1.8 percent.

Underlying demand was softer still as, excluding fuel, non-food purchases declined fully 2.1 percent from the start of the quarter, their steepest drop since January. Sales of food, drink and tobacco shrank 1.2 percent.

However, despite May's sizeable setback, average sales in April/May were still 0.4 percent above their first quarter mean so the retail sector could yet make a positive contribution to GDP growth in the quarter just ended. Even so, total output probably struggled to keep its head above water and ongoing deflationary developments remain a potentially significant threat to household spending going forward.

The data are provided in both nominal and volume measures; the latter is the more important for financial markets. The headline figure is the annual growth in sales volumes adjusted for differences in trading days. Seasonally adjusted monthly changes are also provided. Details are limited in the first estimate but a more complete picture is provided with the following month's release.

Consumer spending accounts for a large portion of the economy, so 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 is a big advantage for investors. 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.