DE: Retail Sales

Mon Apr 30 01:00:00 CDT 2018

Consensus Actual Previous Revised
Month over Month 0.8% -0.6% -0.7% -0.2%
Year over Year 1.0% 1.3% 1.3%

Retailers had a surprisingly poor end to the first quarter. Although sales fell a smaller revised 0.2 percent on the month in February, March saw sharp 0.6 percent decline. This means that volumes have contracted for four straight months and now stand at their weakest level since August 2017. In fact, purchases have only risen once in the last half year. Unadjusted annual growth was 1.3 percent, unchanged from last time.

The March data put first quarter sales 0.9 percent below their level in the fourth quarter when they expanded 0.7 percent versus the July-September period. This implies a negative contribution from the sector to real GDP growth at the start of the year.

The softness of retail spending continues to contrast with persistently high levels of consumer confidence. Worryingly, sentiment has slipped a little in recent months and while still historically very robust, would seem to argue against any near-term pick-up in purchases. Spending on services may have kept overall first quarter household expenditure in positive growth territory but any increase is likely to be only minor. Economic growth will have to come from elsewhere.

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.