EMU: Retail Sales

Tue Jun 05 04:00:00 CDT 2018

Consensus Actual Previous Revised
Month over Month 0.5% 0.1% 0.1% 0.4%
Year over Year 1.7% 0.8% 1.5%

Retail sales (ex-autos) posted a third consecutive monthly rise in April. However, a minimal 0.1 percent advance was well short of market expectations and the weakest of the period. Still, with March's increase revised up to 0.4 percent and base effects friendly, this was enough to lift annual workday adjusted growth from 1.5 percent to 1.7 percent.

In fact, looking on the positive side, April's disappointingly small monthly gain would have been much more impressive but for a 0.7 percent decline in purchases of food, alcohol and tobacco. By contrast, without auto fuel, non-food sales were up fully 1.7 percent, their first increase since last November. This was reassuringly broad-based and led by textiles, clothing and footwear (3.7 percent), mail orders and internet (2.5 percent) and computers, equipment, and books (2.1 percent). Auto fuel was off 0.8 percent.

That said, regionally the rise was much less widespread and heavily dominated by Germany where four successive monthly declines finally ended with a 2.3 percent spurt. France (minus 1.2 percent) and Spain (minus 0.7 percent) had a poor period and the majority of member states reported declines.

The April data put Eurozone sales volumes 0.4 percent above their average level in the first quarter when they dipped 0.1 percent versus October-December. However, the improvement lacks conviction and was far too dependent upon the German rebound where consumer confidence has subsequently declined. So while the retail sector could well make a positive contribution to the second quarter Eurozone GDP growth, the likelihood is that if it does, the impact will be only small.

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.