EMU: Retail Sales

Thu Dec 03 04:00:00 CST 2015

Consensus Actual Previous
Month over Month 0.1% -0.1% -0.1%
Year over Year 2.5% 2.5% 2.9%

Retail sales were again a little softer than expected in October. A second successive monthly 0.1 percent dip reduced annual workday adjusted growth from 2.9 percent to 2.5 percent and means that purchases have not risen since July.

The underlying picture was marginally better as excluding auto fuel, non-food demand edged up 0.1 percent on the month, in line with September's outturn. Nonetheless, with food down a further 0.5 percent after a 0.6 percent drop last time, the overall performance was still disappointingly weak.

A 0.4 percent monthly contraction in Germany did most of the damage but France (minus 0.3 percent) also had a bad period and combined these easily more than offset a 0.3 percent advance in Spain. Elsewhere results were mixed as usual with strong increases in Estonia (2.0 percent) and Portugal (1.0 percent) contrasting with sizeable reversals in Slovenia (minus 1.1 percent) Austria and Ireland (both minus 0.7 percent).

Eurozone's October retail sales were 0.2 percent below their level in the third quarter when they expanded 0.7 percent to provide, as part of total household spending, a sizeable contribution to the modest 0.3 percent rise in real GDP. The drop in October was in line with the declining trend seen in consumer confidence and warns that consumption may not be so supportive this quarter.

That said, household sentiment improved surprisingly sharply in November so there is hope that mid-quarter may be rather stronger. Even so, with volume sales now at their lowest level since June, there would appear to be minimal scope for retailers to raise their selling prices. The ECB will not be happy.

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.