CA: Retail Sales

Wed Dec 23 07:30:00 CST 2015

Consensus Actual Previous Revised
Month over Month 0.4% 0.1% -0.5% -0.4%
Year over Year 1.9% 1.2% 1.4%

Retail sales were surprisingly soft in October. Following a revised 0.4 percent monthly fall in September, purchases only edged up 0.1 percent at the start of the current quarter. However, with base effects quite strongly positive, annual sales growth climbed from 1.4 percent to 1.9 percent.

Volumes were even weaker, declining 0.3 percent versus September and now show a yearly increase of 1.1 percent.

Within the minimal monthly increase in total nominal sales, the main boost was provided by clothing and accessories where purchases rose a healthy 1.9 percent. Sporting goods, hobby, book and music stores (4.9 percent) also had a good month and there were smaller gains in motor vehicles and parts (0.4 percent), furniture and home furnishings (0.5 percent) and general merchandise (0.6 percent). The main areas of weakness were food and drink (minus 1.1 percent) and gasoline (minus 0.4 percent).

The unexpectedly small rise in retail sales contributed towards an anaemic flat monthly performance by real GDP in October (see today's calendar entry). More of the same in November/December would suggest that a near-certain deceleration in economic growth this quarter would be much sharper than anticipated by the central bank and would certainly boost the probability of additional monetary accommodation from the BoC at some point next year.

Retail sales measure the total receipts at stores that sell durable and nondurable goods.

With consumer spending a large part of the economy, market players continually monitor spending patterns. Data are available both for total retail sales and those excluding autos and for 16 different store specializations. Since autos account for over 25 percent of retail sales, the sector can have a pronounced impact on overall sales given their volatility. Retail sales are used to estimate the goods portion of personal consumer expenditures in the quarterly GDP accounts, accounting for about 50 percent of the total.

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 apparel sales are showing exceptional weakness but electronics sales are soaring. 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.