Retail sales were soft in July but matched expectations and followed an upward revision to June. Following a 0.2 percent monthly rise at quarter-end, volumes dipped 0.2 percent, exactly in line with the market consensus and their first fall since March. Even so, annual growth was steady at minus 1.0 percent.

The headline monthly decline masked a 0.4 percent gain in purchases of food, drink and tobacco and a 0.5 percent rise in non-food sales (ex-auto fuel) within which mail order and internet jumped 3.8 percent. However, auto fuel was down 1.2 percent.

Regionally, it was again Germany (minus 0.8 percent) that did much of the monthly damage and weakness here contrasted with increases in both France (0.2 percent) and Spain (0.4 percent). Elsewhere it was the usual mixed picture but most other member states posted declines.

Today's update leaves overall Eurozone volumes in July just 0.1 percent above their average level in the second quarter when they edged 0.1 percent firmer versus the first quarter. In other words, household spending on goods remains sluggish at best. Today's update puts the region's ECDI and ECDI-P at minus 11 and minus 26 respectively and so still in negative surprise territory.

Retail sales volumes in July are expected to fall 0.2 percent on the month that would follow a disappointingly soft 0.3 percent decline in June. Monthly volumes have risen only once since January.

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.