EMU: Retail Sales

Mon Feb 05 04:00:00 CST 2018

Consensus Actual Previous Revised
Month over Month -1.0% -1.1% 1.5% 2.0%
Year over Year 1.9% 1.9% 2.8% 3.9%

Retailers had a poor December. However, a 1.1 percent monthly fall in volumes (ex-autos) was much as expected and followed a sharply stronger revised 2.0 percent surge in November. Annual growth of purchases was 1.9 percent, down from a significantly higher revised 3.9 percent last time.

Monthly non-food sales, excluding auto fuel, slumped 1.2 percent, their second fall in excess of 1 percent since September. However, November's jump was steepened to fully 2.8 percent so the damage here was nothing like as bad as first appearances might suggest. Textiles, clothing and footwear (minus 3.3 percent) had a particularly torrid time and electrical goods and furniture (minus 1.5 percent) similarly struggled. Auto fuel (minus 1.5 percent) saw its fifth fall in six months but pharmaceuticals (0.8 percent) expanded on November's advance.

Regionally, a 1.9 percent slide in Germany did much to depress the headline monthly change and both France (minus 0.4 percent) and Spain (minus 0.6 percent) similarly had a negative effect.

December's data and accompanying revisions make for a highly erratic monthly profile to retail sales last quarter. However, for the period as a whole, purchases rose 0.3 percent versus July-September when they increased at twice that rate. As such, the signs are that overall consumer spending may have cooled a little and that decent fourth quarter Eurozone GDP growth (0.6 percent) was probably in part attributable to stronger overseas demand.

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.