EMU: Retail Sales

Wed Aug 03 04:00:00 CDT 2016

Consensus Actual Previous
Month over Month 0.0% 0.0% 0.4%
Year over Year 1.8% 1.6% 1.6%

Retail sales matched expectations for no change in June. A flat month followed an unrevised 0.4 percent monthly rise in May and similarly left annual workday adjusted growth steady at 1.6 percent.

In fact, discretionary spending was rather stronger as, excluding auto fuel, non-food purchases were 0.3 percent higher than in May, extending their positive run to three months. Food was up just 0.1 percent while auto fuel dropped 1.3 percent.

The relative softness of the headline data had much to do with weakness in Germany, where volumes dipped 0.1 percent on the month, and France, where they fell a sharper 0.4 percent. By contrast, Spain (1.0 percent) enjoyed a good period. Elsewhere the picture was predictably mixed with healthy gains in the likes of Portugal (3.1 percent) contrasting with a hefty decline in Ireland (1.6 percent).

June's data put second quarter Eurozone retail sales just 0.1 percent above their level in the first quarter when they expanded 0.6 percent. The marked deceleration here helps to explain why second quarter GDP growth dropped from 0.6 percent at the start of the year to just (a provisional) 0.3 percent. Consumer confidence does not appear (so far) to have been particularly affected by the Brexit vote but signs of a cooling household sector going into the current quarter cannot please the ECB. Pressure for another monetary ease continues to slowly build.

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.