EMU: Retail Sales

January 6, 2017 04:00 CST

Consensus Actual Previous Revised
Month over Month -0.4% -0.4% 1.1% 1.4%
Year over Year 1.9% 2.3% 2.4% 3.0%

The retail sector struggled in November. Having seen sales (ex-autos) climb a stronger revised 1.4 percent on the month in October, retailers suffered a 0.4 percent drop in mid-quarter. However, the decline was in line with expectations and while large enough to reduce annual workday adjusted growth from 3.0 percent to 2.3 percent, the new rate was still comfortably September's 1.0 percent mark.

That said, discretionary demand was rather softer as, without auto fuel, non-food purchases were down 0.9 percent versus October although this did follow a hefty 2.8 percent spurt then. Sales of food, drink and tobacco matched the 0.4 percent headline decline while auto fuel was up 1.0 percent.

For the larger Eurozone states, a 0.4 percent monthly rise in Spain contrasted with no change in France and a 1.8 percent slump in Germany, albeit after a 2.5 percent jump last time.

The November data put average Eurozone retail sales in the latest two months 0.9 percent above their third quarter mean and so on course to make a useful contribution to fourth quarter economic growth. Moreover, if today's economic sentiment report is anything to go by (see calendar entry) improving consumer morale could well have prompted a rebound in demand at year-end.

Retail sales measure goods that are sold to the consumer or end-user, generally in small quantities and in the state in which they were purchased by the retailer. Eurozone retail sales are reported monthly, in volume terms and exclude autos and motorcycles. A limited sector breakdown is presented in the first release but much more detail is available in the following period's release.

Retail sales are important indicators of domestic consumer demand and are monitored closely by analysts as an important input to GDP. 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's a big advantage for investors. The data are available in both value and volume measures although the press release deals only with volume. In addition to the total, the initial report provides a limited breakdown that separately identifies food, drink and tobacco, and (excluding automotive fuel) non-food products. A more comprehensive dataset is only available with the following month’s release. Unlike the U.S. and Canada, auto sales are not included in the retail sales data.

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.