EMU: Retail Sales

Thu Nov 05 04:00:00 CST 2015

Consensus Actual Previous Revised
Month over Month 0.2% -0.1% 0.0%
Year over Year 3.0% 2.9% 2.3% 2.2%

Retail sales were soft in September. A 0.1 percent monthly dip was weaker than expected and followed an unrevised flat performance in August. Annual workday adjusted growth actually rose from 2.2 percent to 2.9 percent but this simply reflected an even poorer period a year ago. Volumes have now only registered positive monthly growth once since May.

The underlying picture was not quite as bad as headline weakness was largely a function of a downturn in demand for food, drink and tobacco and sales here were off 0.6 percent on the month. Excluding auto fuel, non-food spending edged 0.1 percent higher although this followed a 0.5 percent drop last time. Mainly thanks to a strong July (0.6 percent) third quarter sales were 0.6 percent higher than in the second quarter when they rose 0.4 percent.

Regionally it was the familiar mixed picture. Amongst the larger four EMU members France posted a 0.4 percent monthly contraction while Germany was flat and Spain advanced 0.5 percent. Elsewhere it was a similarly erratic pattern.

Consumer sentiment has waned in recent months and, according to the EU commission's latest survey, in October declined to its weakest level since January. Today's sales update is consistent with some general cooling in overall consumer demand during the course of last quarter and the signs are that this could be furthered in the current period. If so, it would not bode well for fourth quarter real GDP growth.

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.