EMU: Retail Sales

Thu Sep 03 04:00:00 CDT 2015

Consensus Actual Previous Revised
Month over Month 0.5% 0.4% -0.6% -0.2%
Year over Year 2.0% 2.7% 1.2% 1.7%

Retail sales were slightly weaker than expected in August but with July's decline more than halved, annual growth of purchases still comfortably exceeded the market consensus. Volumes were 0.4 percent firmer on the month after a 0.2 percent drop in June for a workday adjusted yearly rise of 2.7 percent, up from 1.7 percent last time.

July's monthly rebound was led by a 0.8 percent jump in purchases of auto fuel and without this, non-food sales were just 0.1 percent higher having only stagnated in June. Food recorded a 0.2 percent advance. As a result, overall sales in July were 0.3 percent above their average level in the second quarter when they also increased 0.3 percent.

Regionally the advance was dominated by a 1.4 percent monthly jump in Germany. Spain (0.6 percent) also made a positive contribution but France (minus 0.2 percent) saw its first decline since March. Elsewhere, there were solid gains in Estonia (2.5 percent), Malta and Portugal (both 1.1 percent) but Slovakia (minus 0.2 percent) struggled.

Growth of retail sales has slowed in recent months, in keeping with signs that consumer confidence may have peaked, at least for now. According to the latest EU Commission survey, household morale improved slightly in August but still registered its second weakest reading since January. Consumption may continue to rise over coming months but the signs are that its contribution to real GDP growth will be only limited.

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.