EMU: Retail Sales

Tue Sep 05 04:00:00 CDT 2017

Consensus Actual Previous Revised
Month over Month -0.2% -0.3% 0.5% 0.6%
Year over Year 2.5% 2.6% 3.1% 3.3%

Retail sales (ex-autos) fell much as expected in July. A 0.3 percent monthly decline was the first drop since last December but failed to reverse a slightly firmer revised 0.6 percent advance in June. Annual growth of purchases was 2.6 percent, down from 3.3 percent last time.

In fact, the headline data were misleadingly soft as, excluding auto fuel, non-food purchases edged 0.1 percent higher on the month following 0.8 percent and 0.5 percent gains in May and June respectively. The limited July breakdown showed textiles, clothing and footwear gaining 0.2 percent but falls in electrical goods and furniture (0.5 percent) and pharmaceuticals (also 0.5 percent). Purchases of food, alcohol and tobacco similarly declined 0.5 percent.

Regionally, the monthly headline reversal reflected surprising weakness in Germany (minus 1.2 percent) and to a lesser extent some softening in Spain (minus 0.4 percent) but France (0.6 percent) made fresh ground. Elsewhere it was the usual mixed performance.

The latest figures put Eurozone retail sales in July just 0.2 percent above their average level in the second quarter when rose a more substantial 0.8 percent. However, consumer confidence is high and, notwithstanding an unexpected increase in July, unemployment is on a solid downward trend. Against this backdrop, the start of quarter setback should prove only temporary.

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.