CA: Retail Sales

July 22, 2016 07:30 CDT

Consensus Actual Previous
Month over Month 0.0% 0.2% 0.9%
Year over Year 1.4% 4.6%

Retail sales were a little stronger than expected in May. However, a 0.2 percent monthly rise in purchases followed a weaker revised 0.8 percent increase in April and annual growth still fell quite sharply, from 4.4 percent to 3.6 percent. Volumes moved much in line, gaining a minimal 0.1 percent versus the start of the quarter for a yearly increase of 2.5 percent.

Sales were up on the month in six of the eleven reporting subsectors. Food and drink (2.1 percent) saw a fourth increase in five months and gasoline followed April's 6.4 percent spurt with a rise of 2.3 percent. Higher prices were a factor here. Clothing and accessories (2.8 percent) also had a good month but there were sizeable decreases in motor vehicles and parts (2.0 percent), furniture and home furnishings (3.5 percent) and building material and garden equipment and supplies (0.7 percent). General merchandise (minus 0.5 percent) also struggled.

The May data mean that average sales in the first two months of the second quarter were 0.5 percent above their first quarter mean. However, rising gasoline charges have biased up recent months and underlying volume trends remain relatively soft. Retail trade looks unlikely to have made much of a contribution to second quarter real GDP growth. That said, this will not come as any surprise to a BoC that has already estimated a 1.0 percent (saar) contraction in total output last quarter.

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.