DE: Retail Sales

Fri Mar 02 01:00:00 CST 2018

Consensus Actual Previous Revised
Month over Month 0.8% -0.7% -1.9% -1.1%
Year over Year 2.3% -1.9% 0.2%

Retail sales were surprisingly soft at the start of the year. A 0.7 percent monthly fall in volumes followed a shallower revised 1.1 percent decline in December and put purchases at their weakest level since last August. Unadjusted growth jumped from 0.2 percent to 2.3 percent but only because of favourable calendar effects.

Sales have now contracted in three of the last four months and January's drop left them 0.9 percent below their average level in the fourth quarter.

As Wednesday's labour market report made plain, unemployment is at record lows and still falling while the GfK's consumer climate indicator suggests household sentiment is only just short of its record peak. The sluggishness of the retail sector thus remains something of an anomaly. Political uncertainty prompted by last September's inconclusive Federal election may be partly to blame but that is not obvious in the sentiment data. Accordingly, some rebound still seems probable going forwards. However, for now, consumer spending again looks likely to provide at best only a minor boost to first quarter economic growth.

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.