FR: Consumer Mfgd Goods Consumption

July 29, 2016 01:45 CDT

Consensus Actual Previous Revised
Month over Month 0.1% -1.2% 0.2% 0.1%
Year over Year 0.6% 2.6%

Household spending on manufactured goods collapsed in June. A 1.2 percent monthly nosedive was much steeper than expected and followed a slightly smaller revised 0.1 percent rise in May. Annual growth of purchases slumped from 2.6 percent to just 0.6 percent, its weakest outturn since November 2014.

June's monthly contraction was led by autos which followed falls of 1.3 percent in April and 0.2 percent in May with a further 1.2 percent decline. The other manufactured goods category (minus 0.3 percent) also had a poor month. However, it was not all bad news as household goods were up 2.8 percent, albeit after a 10.9 percent drop last time, and textiles gained 0.7 percent. Elsewhere, energy was off 6.3 percent but food rose 0.5 percent.

As a result, total spending on goods fell 0.8 percent versus May when it declined by an equivalent amount. Weakness here helps to explain the failure of the French economy to grow last quarter (see today's GDP calendar entry). Looking ahead, July's terrorist attacks could make for a poor start to the current quarter although consumer confidence appears to have held up quite well.

Consumption of manufactured goods by consumers is an indicator of consumer spending for household durable goods such as autos and furniture. The data are released separately but also as part of the measure of total goods spending.

This indicator is a measure of retail sales and is unique to France. It measures consumer spending for household durable goods such as autos and furniture. The data are seasonally and workday adjusted. These adjustments eliminate the fluctuations that are solely due to changes in the number of working days. The data appear to be particularly sensitive to the number of worked Saturdays. With consumer spending a large part of the economy, market players continually monitor spending patterns. Retail sales are a measure of consumer well-being.

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.