|Month over Month||0.4%||-0.4%||0.0%|
|Year over Year||2.9%||2.1%||3.4%||3.5%|
Retail sales were surprisingly weak in October. A 0.4 percent monthly drop followed an unrevised flat reading in September and means that purchases have still not risen since July. Unadjusted annual growth slowed to 2.1 percent, down from 3.5 percent in September and its worst performance since May.
Volumes last month were at their lowest level since June and some 0.6 percent below their third quarter average. This is consistent with recent consumer confidence surveys which have found a sentiment in a shallow trend decline since the middle of the year. However, the same reports also suggested that confidence levels remain historically high and, moreover, GfK pointed to the first increase in buying intentions in November in half a year.
Still, consumption played a major part in the 0.3 percent quarterly rise in real GDP in July-September and today's data at least warn that the fourth quarter could see a rather smaller contribution. The monthly sales data are subject to often sizeable revision but as they stand they make strong fourth quarter GDP growth look all the less likely.
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.