Retail sales were weak in June. However, a steeper than expected 0.8 percent monthly drop, the first fall since March, followed a sharply stronger revised 1.9 percent jump in May. As a result, volumes were still at their second highest level since last November and, at 0.1 percent, unadjusted annual growth was positive for the first time since September 2022.

The June data mean that sales of food in the first six months of 2023 fell 5.8 percent versus the first half of last year. This largely reflected a hefty increase in prices. Indeed, nominal purchases were up fully 7.6 percent. Over the same period, non-food volumes declined 3.6 percent but were up 1.1 percent in nominal terms. Real online and mail order business contracted 7.3 percent and DIY stores were down 6.9 percent.

Still, today's report leaves total second quarter volumes 1.1 percent above their first quarter level, implying a positive contribution from the sector to GDP growth. That said, while inflation is now falling, it remains high enough to squeeze real incomes and consumers are still very cautious. As such, household spending is likely to be subdued near-term. To this end, today's update puts the German ECDI at minus 19 and the ECDI-P at minus 31. Economic activity in general continues to fall some way short of market expectations.

Retail sales volumes have been depressed but did rise 0.4 percent on the month in May. June's expectations are a 0.5 percent decrease.

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.