EMU: Retail Sales

Thu May 04 04:00:00 CDT 2017

Consensus Actual Previous Revised
Month over Month 0.0% 0.3% 0.7% 0.5%
Year over Year 2.1% 2.3% 1.8% 1.7%

Retail sales (ex-autos) rose a stronger than expected 0.3 percent on the month in March although the good news here was tempered by February's increase being shaded a couple of ticks to 0.5 percent. Even so, annual growth of volumes picked up from 1.7 percent to 2.3 percent, a 4-month high.

Promisingly, March's monthly advance was led by discretionary spending as, excluding auto fuel, non-food purchases were up 0.4 percent (although this was little more than half of the February rate). Food saw a 0.2 percent gain while auto fuel dropped 0.3 percent. The headline print made for a modest 0.3 percent quarterly increase in overall sales, a 0.5 percentage point drop versus the fourth quarter rate and a tick short of the third quarter rate too.

Regionally, Eurozone sales were held in check by a minimal 0.1 percent monthly rise in Germany but France and Spain (both 0.6 percent) provided a more substantial boost. Elsewhere, the picture was mixed as usual.

With consumer confidence already high and rising (April equalled the post-Great-Recession high according to the EU Commission), prospects for household spending should be positive enough. However, the ECB will probably want confirmation of that before making any significant shift on policy. The conditions for a change in the forward guidance in June seem to be falling into place, but, at this stage, not much more than that.

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.