CH: Adjusted real retail sales

Fri Sep 01 02:15:00 CDT 2017

Actual Previous Revised
Y/Y % change -0.7% 1.5% 1.7%

Retail sales were weak in July. Following a marginally larger revised 0.9 percent increase in June, volumes fell 1.3 percent on the month to reduce annual workday adjusted growth from 1.7 percent to minus 0.7 percent.

The headline data were not quite as soft as first appearances suggest as, excluding auto fuel, non-food demand only declined a monthly 0.7 percent but this still offset much of the cumulative 1.1 percent increase seen in May/June. And with the second quarter having started with a hefty 3.1 percent slump, it means that the underlying trend in purchases is still worryingly sluggish. Elsewhere, sales of food, drink and tobacco dropped 1.4 percent from June after a 0.8 percent gain previously.

The poor July report suggests that the economic recovery has yet to bolster household confidence to the extent that would provide any meaningful boost to consumer buying intentions. A flat labour market is not helping either.

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.