DE: Retail Sales

Thu Nov 30 01:00:00 CST 2017

Consensus Actual Previous
Month over Month 0.3% -1.2% 0.5%
Year over Year -1.4% 4.1%

Retail sales were surprisingly weak in October. Following an unrevised 0.5 percent monthly gain in September, volumes (ex-autos) slumped fully 1.2 percent, their steepest decline since September 2016. Unadjusted annual growth was minus 1.4 percent, down from 4.1 percent at quarter-end, albeit biased negatively by fewer shopping days.

October's monthly fall in purchases was the third in the last four months and, once again, flies in the face of sustained very high levels of consumer confidence. A buoyant labour market and strong household fundamentals do not seem to be providing the boost that would normally be expected.

It may be that there are some sizeable positive revisions in the pipeline but, as they stand, the latest figures put sales 1.0 percent below their third quarter level. This means that November/December will need to see a decent rebound just to hold the third quarter flat.

Retail sales measure the total receipts at stores that sell durable and nondurable goods. The data are compiled from about 27,000 retail businesses and are reported in both nominal and volume terms. Autos are excluded. A very limited breakdown of subsector performance is available in the initial report which is itself subject to sometimes sizeable revision but much greater detail is provided in the following month's release.

With consumer spending a large part of the economy, market players continually monitor spending patterns. Retail sales are a measure of consumer well-being. Both the Federal Statistical Office and the Bundesbank publish retail trade data. Until recently, there were vast differences between them, primarily because they each used a different seasonal adjustment program. This difference ended when the Statistical Office began using the U.S. Census Arima X12 methodology as well as their Berlin method. Another difference is that the Federal Statistical Office data are generally for total retail sales while the Bundesbank data features sales excluding autos and petrol stations or excluding only autos. The data here are for total retail sales.

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.