EMU: Retail Sales

Mon Dec 05 04:00:00 CST 2016

Consensus Actual Previous Revised
Month over Month 0.9% 1.1% -0.2% -0.4%
Year over Year 2.4% 1.1% 1.0%

Non-auto retail sales saw a much-needed rebound in October. In fact, a 1.1 percent monthly jump was somewhat stronger than expected and the sharpest since August 2014. Even so, after taking on board a steeper revised 0.4 percent decline in September, the outturn was broadly in line with the market consensus. Annual workday adjusted growth improved from 1.0 percent to 2.4 percent.

The breakdown of the October data suggests that underlying demand was even more buoyant. Hence, excluding auto fuel, non-food purchases were up fully 2.3 percent on the month, easily more than reversing September's worryingly large 1.2 percent slump.

Regionally, the overall monthly advance was dominated by Germany where sales were up a hefty 2.4 percent. Elsewhere amongst the larger member states the news was not so promising with France edging just 0.1 percent firmer and Spain dipping 0.1 percent.

October's recovery puts Eurozone sales at the start of the current quarter 0.8 percent above their average level in July-September when they advanced only half this rate. The improvement is very welcome and potentially, importantly timed just ahead of this week's ECB meeting. Nonetheless, without the German contribution the headline data would have looked a good deal weaker so the aggregate upturn will need to show that it is both more broadly based and sustainable if it is to be truly convincing.

Retail sales measure goods that are sold to the consumer or end-user, generally in small quantities and in the state in which they were purchased by the retailer. Eurozone retail sales are reported monthly, in volume terms and exclude autos and motorcycles. A limited sector breakdown is presented in the first release but much more detail is available in the following period's release.

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.