EMU: Retail Sales

Mon Oct 05 04:00:00 CDT 2015

Consensus Actual Previous Revised
Month over Month 0.1% 0.0% 0.4% 0.6%
Year over Year 2.5% 2.3% 2.7% 3.0%

Retail sales stagnated in August. However, the slightly weaker than expected outturn at least followed a stronger revised 0.6 percent monthly rise in July and means that purchases have still not seen a decline since March.

That said, the composition of the mid-quarter data was disappointing. Hence, while sales of food, drink and tobacco advanced a healthy 0.8 percent versus July, excluding auto fuel, the non-food sector posted a 0.3 percent drop, its first decrease in five months. Auto fuel was up fully 1.8 percent.

The headline stall was in no small way due to a 0.4 percent monthly reversal in Germany. France (0.3 percent) and Spain (0.2 percent) both posted fresh gains as did Portugal (1.5 percent), Ireland (0.9 percent) and Latvia and Slovenia (both 0.3 percent). Other reporting states all saw falls, notably Finland and Estonia (both 1.1 percent), Luxembourg (1.5 percent) and Belgium (0.5 percent).

Despite the sluggishness of August, average Eurozone sales volumes for July/August were 0.6 percent stronger than their second quarter mean when they increased 0.4 percent versus the January-March period. Accordingly, the trend remains in the right direction.

However, consumer confidence has waned in recent months and, if the latest EU commission survey is to be believed, recorded its second weakest level since January in September. If so, it may be that household spending will provide only a modest boost to GDP growth in the fourth quarter. In any event, it seems unlikely that consumer demand will be strong enough to allow retailers to raise their prices significantly.

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.