Having already fallen sharply in December, retail sales unexpectedly lost further ground at the start of the year. Volumes declined 0.3 percent on the month, well short of the market consensus and compounding December's (markedly shallower) revised 1.7 percent decrease. Sales have now fallen in three of the last four months with the latest drop leaving purchases at their lowest level since February 2021. Unadjusted annual growth was minus 4.6 percent, up from minus 5.7 percent but a fourth successive negative print.

January's monthly setback masked very divergent developments in the two main sectors. Hence, while food posted a 3.1 percent increase, non-food saw a 0.8 percent contraction. Mail order was down fully 6.5 percent.

The January data put volume sales 0.2 percent below their average level in the fourth quarter and so warn of another possible negative contribution to real GDP growth this quarter. Looking ahead, consumer confidence has at least recently improved but remains historically soft while household buying intentions are weak. This holds out little promise of any meaningful and sustained recovery in spending. More generally, today's update puts the German ECDI at 8 and the ECDI-P at 4, both measures indicating that overall economic activity is broadly matching market expectations.

Retail sales are expected to rise 2.0 percent on the month in January after collapsing by 5.3 percent in December.

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. 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. However, by excluding the services sector, changes in retail sales data can differ significantly from those in total household spending.