DE: Retail Sales

Wed Sep 30 01:00:00 CDT 2015

Consensus Actual Previous Revised
Month over Month 0.2% -0.4% 1.4% 1.6%
Year over Year 2.5% 3.3% 2.8%

Retail sales were unexpectedly soft in August. Following a larger revised 1.6 percent monthly bounce in July, purchases fell 0.4 percent. Unadjusted annual growth was 2.5 percent, down from 3.8 percent last time and the slowest pace since May.

However, August's setback was modest enough to leave volumes at their second highest level on record and average purchases in July/August were still 1 percent above their second quarter mean. As such it looks as if household spending should make a useful contribution to third quarter real GDP growth.

Nonetheless, GfK's September survey suggested that consumers' willingness to buy has started to wane, albeit from historically high levels. Given the poor short-term correlation, this may not say much about actual retail sales this month. Even so, with the fallout from the Volkswagen emissions scandal at this stage still highly uncertain, there is clearly a risk that households adopt a more cautious approach towards spending in the coming quarter. This would make retailers' task of increasing prices, and so raising the rate of inflation, all the more problematic.

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.