EMU: Retail Sales

February 3, 2017 04:00 CST

Consensus Actual Previous Revised
Month over Month 0.3% -0.3% -0.4% -0.6%
Year over Year 1.8% 1.1% 2.3% 2.5%

December was not a good month for Eurozone retailers. Excluding autos, volume sales declined 0.3 percent versus November when they fell a steeper revised 0.6 percent. Annual growth of purchases was 1.1 percent, down from 2.5 percent and the weakest since September.

The monthly year-end decrease was at least concentrated in food, alcohol and tobacco where sales were off 0.4 percent. Even so, excluding auto fuel, non-food volumes were only flat after a 0.8 percent slide last time. Quarterly growth of overall sales was still comfortably positive at 0.8 percent but this was only courtesy of a 1.5 percent monthly spike in October. Indeed, purchases have now fallen in four of the last five months.

Regionally, weakness was led by Germany, which recorded a 0.9 percent monthly decrease, and a number of the smaller member states, notably Finland (minus 3.2 percent), Ireland (minus 2.7 percent) and Portugal minus 2.3 percent). More optimistically, both France (0.8 percent) and Spain (0.1 percent) made fresh headway.

The December sales data are disappointingly soft. However, if buoyant consumer confidence surveys are anything to go by, the German drop may well have been reversed last month and, more generally, solid employment gains in the region bode well. Nonetheless, a poor January would raise fresh doubts about the sustainability of the current pace of the Eurozone's economic recovery and make price increases all the harder to implement.

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.