EMU: Retail Sales

Mon Jan 08 04:00:00 CST 2018

Consensus Actual Previous Revised
Month over Month 1.4% 1.5% -1.1%
Year over Year 2.2% 2.8% 0.4% 0.2%

After a very poor start to the quarter, retailers had a much better time of it in November. Excluding autos, sales jumped 1.5 percent on the month, marginally firmer than expected and their best showing since October 2016. Annual growth was 2.8 percent, up sharply from just 0.2 percent last time.

In fact, the monthly rebound was actually stronger than first appearances suggest as, ex-auto, non-food purchases were up fully 2.3 percent and easily more than reversed the previous period's 1.2 percent decline. Within this, textiles, clothing and footwear (5.9 percent) were especially robust and pharmaceutical and medical goods (0.6 percent) also had a decent month.

Regionally the headline advance was dominated by Germany where sales leapt some 2.3 percent on the month. France (1.2 percent) and Spain (1.3 percent) similarly fared well and only Estonia amongst the reporting countries posted a decline (0.2 percent).

November's bounce was only the second monthly rise in overall Eurozone volumes since June. However, the increase was enough to put average October/November sales 0.1 percent above their mean level in the third quarter and even a flat December would make for a 0.4 percent quarterly rise, just a tick short of the third quarter gain. With consumer confidence historically very high, unemployment at a multi-year low and interest rates still close to zero, the outlook for household spending over coming months would seem particularly bright.

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.