CH: Adjusted real retail sales

September 1, 2016 02:15 CDT

Actual Previous Revised
Y/Y % change -2.2% -3.9% -3.5%

Retail sales had a better month in July, posting a modest 0.2 percent increase versus June which essentially reversed that period's smaller revised decline. Annual workday adjusted growth was minus 2.2 percent, up from minus 3.5 percent last time.

Purchases of food, alcohol and tobacco were up 0.9 percent on the month after a 0.9 percent fall at the end of the second quarter and, more importantly, excluding auto fuel sales of non-food items advanced 0.3 percent. This was the latter's first rise in three months.

Even so, earlier weakness meant that the level of overall sales in July was still only flat at its average second quarter level. That was at least an improvement on that period's 1.1 percent quarterly decline but suggests that households are still concerned about the economic situation at home. This is consistent with the latest SECO consumer confidence survey which showed no improvement in sentiment at the start of the current quarter.

Retail sales measure the total receipts at stores that sell durable and nondurable goods. The survey comprises around 4,000 companies with the small-sized firms asked to provide monthly turnover data on a quarterly basis. Statistics are provided in both nominal and volume measures; the latter is the more important for financial markets. The headline figure is the annual growth in sales volumes adjusted for differences in trading days. Seasonally adjusted monthly changes are also provided. Details are limited in the first estimate but a more complete picture is provided with the following month's release.

Consumer spending accounts for a large portion of the economy, so 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 is a big advantage for investors. 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.