Retail sales were surprisingly weak in February. Following a stronger revised but meagre 0.1 percent monthly advance in January, volumes fell 1.3 percent, their second decline in the last three months. Unadjusted annual growth was minus 7.0 percent, down from minus 4.0 percent. The latest drop left purchases at their lowest level since February 2021 and 1.6 percent below their mark just before the arrival of Covid.

February's monthly setback reflected a 0.3 percent fall in non-food sales which masked a 0.2 percent increase in food demand.

The February data put average volume sales in the first two months of the quarter 1.3 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 and household buying intentions are weak. This holds out little promise of any meaningful and sustained recovery in spending. However, more generally, today's update puts the German ECDI at 29 and the ECDI-P at 31, both measures indicating that overall economic activity is running quite well ahead of market expectations.

Retail sales are expected to rise 0.5 percent on the month in February after falling 0.3 percent in January and falling 1.7 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.