EMU: Retail Sales

Tue Nov 07 04:00:00 CST 2017

Consensus Actual Previous Revised
Month over Month 0.6% 0.7% -0.5% -0.1%
Year over Year 2.8% 3.7% 1.2% 2.3%

Following a poor, but notably stronger revised, August, retailers had a good September. Excluding autos, sales volumes increased a slightly firmer than expected 0.7 percent on the month, their sharpest rise since last October. Annual growth picked up from 2.3 percent to a more than respectable 3.7 percent.

Purchases of food, drink and tobacco (1.3 percent) dominated the monthly headline gain and, without auto fuel, non-food purchases advanced a more modest 0.5 percent. Even so, this equalled their best performance since May and means that discretionary spending has now risen for five successive months. Textiles, clothing and footwear (1.1 percent) were particularly firm and electrical goods and furniture (0.6 percent) also fared quite well but pharmaceuticals (minus 0.2 percent) struggled.

Regionally, France (1.2 percent) enjoyed a very good period but Germany (0.5 percent), Italy (0.3 percent) and Spain (0.4 percent) all made ground too.

Today's report means that third quarter Eurozone retail sales were up a real 0.6 percent versus the second quarter when they rose 0.9 percent. This may equate with a slight softening in total consumption growth but with consumer confidence high and still rising, any deceleration should be muted and services may well have picked up some momentum anyway. In general, domestic demand seems to be holding its own quite nicely.

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.