EMU: Retail Sales

Wed Oct 04 04:00:00 CDT 2017

Consensus Actual Previous Revised
Month over Month 0.4% -0.5% -0.3%
Year over Year 1.2% 2.6% 2.3%

Retailers had a surprisingly poor August. Excluding autos, volume sales fell 0.5 percent on the month, equalling their worst performance since October 2015 and making for their first back-to-back decline since December/January. Annual growth of purchases was 1.2 percent, down from 2.3 percent in July.

Weakness was apparent across the board. Hence, food, drink and tobacco saw a 0.3 percent monthly fall while, ex-auto fuel, non-food demand was off a slightly steeper 0.4 percent. In particular, electrical goods and furniture (minus 0.5 percent) struggled although there was better news from pharmaceuticals (0.9 percent).

France (minus 0.6 percent) and Germany (minus 0.4 percent) did much to depress overall monthly growth but Spain (0.1 percent) was marginally firmer. For the region as a whole, average July/August sales were just flat at their mean level in the second quarter when they advanced a solid 1.0 percent.

The unexpected softness of the August data must raise a few doubts about third quarter Eurozone GDP growth. However, consumer (and business) surveys have been very buoyant for a while now and confidence levels are high. Unless the jobs market stalls, it still seems likely that sales will rebound soon.

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.