CH: Adjusted real retail sales

Thu Nov 30 02:15:00 CST 2017

Actual Previous Revised
Y/Y % change -3.0% -0.4% 0.9%

Retail sales were very weak in October. A 1.5 percent monthly slump easily more than offset September's upwardly revised 0.9 percent gain and reduced annual workday adjusted growth of purchases from 0.5 percent to minus 3.0 percent, its worst outcome since December 2016.

To make matters worse, discretionary demand was even softer. Hence, excluding auto fuel, non-food sales were down 1.7 percent from September when they advanced 0.6 percent from August. Food, drink and tobacco (minus 1.1 percent) were not much better.

The latest report puts total retail sales volumes in October some 1.1 percent below their average level in the third quarter when they declined 0.4 percent versus April-June. Spending on services continues to perform a good deal better but without some renewed strength in November/December, the retail sector will weigh more significantly on GDP growth this quarter.

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.