Retailers had a surprisingly poor end to the third quarter. Sales fell 0.8 percent on the month, their fourth straight decline and missing the market consensus by more than a full percentage point. The August drop was revised marginally shallower but the latest slide left volumes at their lowest level since February 2021 and reduced unadjusted annual growth from minus 1.9 percent to minus 4.6 percent, a 5-month trough.

September's setback was attributable to the non-food sector where purchases fell fully 3.7 percent on the month, in no small way due to continued weakness in mail order and internet. By contrast, food had a much better month with demand up 2.2 percent.

Today's report leaves overall third quarter volume sales down 1.2 percent versus the second quarter and so confirms a fresh hit to the period's GDP growth. Inflation is falling but with consumer confidence very soft and, at best, only trending sideways, the fourth quarter is unlikely to be much better. Recession might well have arrived by year-end. The September data put the German RPI at minus 22 and the RPI-P at minus 1. However, for now, the unexpected sluggishness of economic activity in general remains confined to inflation as the real economy is performing much as anticipated.

Retail sales volumes are expected to rise 0.5 percent on the month in September following August's unexpected 1.2 percent decline.

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.