The retail sector disappointed at the start of the year. A modest 0.3 percent monthly increase in volume sales was well short of the market consensus and did little to reverse December's (smaller revised) 1.7 percent decline. Annual growth was minus 2.3 percent, up from minus 2.8 percent but still sub-zero for a fourth consecutive month.

January's monthly advance reflected a 1.8 percent increase in purchases of food, drink and tobacco, their first gain since last September, and a 0.8 percent rise in non-food (ex-auto fuel) sales. Auto fuel saw a 1.5 percent decline.

Regionally, France (0.1 percent) eked out a minimal monthly rise but Germany (minus 0.3 percent) posted its third drop in the last four months. Elsewhere, the picture was similarly mixed with a sharp 4.9 percent jump in the Netherlands contrasting with a 9.8 percent collapse in Austria.

The January data leave overall Eurozone sales 0.5 percent below their average level in the fourth quarter. February and/or March will need to be a good deal stronger if the retail sector is not to extend its run of negative contributions to quarterly real GDP growth. Today's update reduces the region's ECDI to minus 31 and the ECDI-P to a very low minus 53. In other words, overall economic activity is now significantly underperforming market expectations.

January is expected to rise 1.0 percent following December's particularly poor 2.7 percent monthly fall.

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.