The retail sector had a particularly poor end to 2022. Having risen a sharper revised 1.2 percent on the month in November, volume sales dropped fully 2.7 percent. Although only slightly steeper than the market consensus, this was their worst performance since April 2021 and, but for positive base effects, annual growth would have been a lot more negative than the actual minus 2.8 percent print.

Moreover, December's slump reflected broad-based weakness. Hence, food, drink and tobacco purchases were down a monthly 2.9 percent and, excluding auto fuel, non-food was off 2.6 percent. Auto fuel declined 2.3 percent.

Regionally, Germany (minus 5.3 percent) dominated the headline monthly slide but there were also losses in France (minus 1.0 percent) and Spain (minus 1.4 percent). Elsewhere, most other member states also saw declines.

The December setback leaves fourth quarter Eurozone sales 1.1 percent below their third quarter level. Consumer confidence at least appears to have stabilised in recent months but with buying intentions still very soft, prospects for the current quarter do not look bright. Today's update reduces the region's ECDI to 15 and the ECDI-P to just 3. In other words, overall real economic activity is now only performing much as expected.

December is expected to fall back a sizable 2.5 percent on the month to more than reverse November's 0.8 percent rise.

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.