|Y/Y % change||0.2%||0.2%||-0.3%||-0.6%|
Retail sales rose 0.1 percent on the month in September to lift workday adjusted annual growth from a weaker revised minus 0.6 percent in August to 0.2 percent, in line with market expectations. However, the move back above zero was wholly attributable to volumes and nominal purchases were down fully 2.0 percent on the year.
Moreover, even the overall monthly increase was essentially accounted for by sales of food, alcohol and tobacco which rose 1.0 percent. Excluding food, non-auto fuel purchases were down 0.4 percent after declines of 0.5 percent and 0.1 percent in July and August respectively.
The modest monthly gain means that total volumes in the third quarter were 0.5 percent above their second quarter level, suggesting that overall household spending provided a boost to real GDP over the period. While obviously good news, margins are still under pressure and demand will need to strengthen significantly if businesses are to be able to raise prices on a sustainable basis. At this stage, a negative annual CPI inflation rate looks likely to be the norm well into next year. Accordingly the risk of additional SNB easing, especially should the ECB move next month, remains a very real possibility.
The data are provided in both nominal and volume measures; the latter is the more important for financial markets. The headline figure is the annual growth in sales volumes adjusted for differences in trading days. Seasonally adjusted monthly changes are also provided. Details are limited in the first estimate but a more complete picture is provided with the following month's release.
Consumer spending accounts for a large portion of the economy, so 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 is a big advantage for investors. 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.
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