DE: Retail Sales

Wed Jan 31 01:00:00 CST 2018

Consensus Actual Previous Revised
Month over Month -0.4% -1.9% 2.3% 1.9%
Year over Year -1.9% 4.4% 4.3%

Retail sales (ex-autos) were very weak at year-end. A 1.9 percent monthly decline was much steeper than expected and the worst performance since December 2013. With November's solid gain revised down to (a still impressive) 1.9 percent and fewer working days compared with a year ago, unadjusted annual growth of purchases slumped from 4.3 percent to also minus 1.9 percent.

The surprise nosedive left fourth quarter volumes 0.1 percent below their level in the third quarter when they rose 0.4 percent versus the April-June period. In other words, the retail sector will have acted as a slight drag on real GDP growth last quarter.

Spending on services will no doubt have held up a good deal better but overall household consumption is likely to have provided only a modest boost to German economic growth in the closing months of 2017. And that despite consumer confidence being around record highs and unemployment at a post-Reunification low. Some rebound in demand looks very probable in January and the December data could well be revised up. However, as they stand, today's results suggest that retailers are not enjoying as many of the benefits of a strong German economic upswing as might have been anticipated.

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.