CH: Adjusted real retail sales

October 3, 2016 02:15 CDT

Actual Previous Revised
Y/Y % change -3.0% -2.2% -2.7%

Retailers had a poor August. Volume sales were down 0.6 percent on the month after no growth in July and declines in the previous six months. Adjusted for differences in working days, purchases were 3.0 percent lower on the year, steepening their sharper revised 2.7 percent drop at the start of the quarter and constituting their second worst performance so far in 2016.

To make matters worse, weakness was again concentrated in the non-food sector where, excluding auto fuel, demand dropped 0.7 percent on the month, its fourth contraction in a row.

August's setback leaves average overall sales in July/August some 0.6 percent below their mean level in the second quarter and it will require an improbably large 2.0 percent monthly bounce in September just to keep the third quarter flat. Second quarter real GDP growth (0.6 percent) flattered to deceive with domestic demand disappointingly soft. Today's data hold out little hope of any real improvement in the quarter just ended.

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.