CA: Retail Sales

Fri Apr 22 07:30:00 CDT 2016

Consensus Actual Previous Revised
Month over Month -0.8% 0.4% 2.1%
Year over Year 5.6% 6.4% 7.3%

Following their surprise surge in January (unrevised at 2.1 percent) February retail sales were always going to be subject to some downside risk. As it is, purchases surprised with a respectable 0.4 percent monthly rise which, despite reducing annual growth from 7.3 percent to 5.6 percent, left intact a decent rising trend.

Moreover, with prices weak, the increase in nominal sales was easily eclipsed by volumes which jumped an impressive 1.5 percent on the month.

Within the monthly nominal headline rise, nine of the eleven reporting subsectors recorded gains. Amongst these, clothing and accessories (2.7 percent), sporting goods, hobby, book and music stores (2.0 percent) and furniture home furnishings (1.9 percent) stood out. Motor vehicle and parts dealers (1.0 percent) also had a good month and without this category, sales would have risen 0.2 percent versus January. The only decline of note was in gasoline (4.9 percent) where falling prices were a major factor.

Average retail sales in January/February were a very solid 1.4 percent above their average level in the fourth quarter. However, February was a bad period for export volumes (minus 2.2 percent) and real manufacturing shipments (minus 2.0 percent) so monthly GDP could still disappoint. That said, the economy got off to a very good start this quarter January GDP rose 0.6 percent and thanks to an apparently buoyant consumer sector, the BoC's new 2.8 percent (saar) quarterly growth estimate now looks much more achievable.

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.