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Retail sales were soft in February. A 0.4 percent monthly decline followed a steeper revised 0.5 percent drop in January and means that purchases have now fallen in three of the last four months. Annual sales growth slipped from minus 0.1 percent to minus 0.2 percent and has been below zero since July last year.
The mid-quarter decrease was wholly attributable to a 0.8 percent slide in the food, drink and tobacco sector. Excluding auto fuel, non-food purchases were flat after a 0.7 percent decline at the start of the year.
Average sales in January/February were 0.3 percent below their fourth quarter average and without a sizeable bounce in March the retail sector will subtract from real GDP growth this quarter.
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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