DE: Retail Sales

Fri Jul 31 01:00:00 CDT 2015

Consensus Actual Previous Revised
Month over Month 0.3% -2.3% 0.5% 0.4%
Year over Year 4.0% 5.1% -0.4% -1.0%

Retail sales collapsed in June. A 2.3 percent monthly slump was the worst performance since December 2013, much weaker than expected and even followed a slightly downwardly revised 0.4 percent gain in May. Annual unadjusted growth misleadingly jumped from minus 1.0 percent to 5.1 percent but this simply reflected favourable calendar effects.

June's setback was easily more than enough to reverse the gains posted in April and May and put the level of purchases at their lowest level since November last year. Second quarter volumes were down 0.3 percent versus the first quarter when they advanced a solid 1.8 percent to provide a major boost to real GDP growth.

Although consumer confidence has shown signs of topping out in recent months, it has done so at a high enough level to suggest that households in general remain in very good spirits. Moreover, as the new July GfK survey pointed out, consumers' willingness to buy is still strong. As such the chances are that the June sales data will be revised up and/or July will see a sizeable rebound. That said, as things currently stand second quarter economic growth looks all the less likely to impress and forecasts are likely to be shaded lower.

Retail sales measure the total receipts at stores that sell durable and nondurable goods. The data are compiled from about 27,000 retail businesses and are reported in both nominal and volume terms.

With consumer spending a large part of the economy, market players continually monitor spending patterns. Retail sales are a measure of consumer well-being. Both the Federal Statistical Office and the Bundesbank publish retail trade data. Until recently, there were vast differences between them, primarily because they each used a different seasonal adjustment program. This difference ended when the Statistical Office began using the U.S. Census Arima X12 methodology as well as their Berlin method. Another difference is that the Federal Statistical Office data are generally for total retail sales while the Bundesbank data features sales excluding autos and petrol stations or excluding only autos. The data here are for total retail sales.

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.