CH: Adjusted real retail sales

December 1, 2016 02:15 CST

Consensus Actual Previous Revised
Y/Y % change -2.1% -0.5% -2.3% -2.1%

Retail sales enjoyed a solid bounce in October. With purchases already revised up to a 0.3 percent monthly rise in September, the fourth quarter started with a 1.2 percent spurt, the strongest performance since June 2015. As a result, annual workday adjusted growth climbed from minus 2.1 percent to minus 0.5 percent, also its best reading since the middle of last year.

In fact, October's increase in volumes was even better than first appearances suggest as sales of food, drink and tobacco declined 0.4 percent versus September. Excluding auto fuel, non-food purchases were up fully 2.8 percent and at their highest level since the start of the year.

With overall sales in October 1.3 percent above their third quarter average, there is good reason for supposing that household consumption will make more of a contribution to fourth quarter economic growth than it did in July-September. That said, a softening labour market could make last month's apparent spending spree a flash in the pan so retailers will still have their fingers crossed for a sustained improvement in the key Christmas holiday period.

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.