Retailers had a dismal November. Volumes sales slumped fully 2.5 percent on the month, falling well below the market consensus and easily more than reversing October's upwardly revised 1.3 percent gain. The drop was the steepest since April 2022 and left sales at their lowest level since February 2021. It also reduced unadjusted annual growth from 0.2 percent to minus 2.0 percent.

Purchases of food were down 0.5 percent versus October but the real damage was done by the non-food sector where sales plummeted some 3.6 percent with internet and mail order off 2.8 percent. However, there were some areas of strength with textiles and clothing up 2.0 percent.

Even so, today's report makes for grim reading and leaves average overall volume sales in October/November 0.3 percent below their mean level in the third quarter. Indeed, absent any revisions, December will need a monthly jump of at least 2.3 percent just to keep the fourth quarter flat. As such, the sector looks very likely to have subtracted from quarterly GDP growth, boosting the likelihood of recession. The November report puts the German RPI at minus 4 but the RPI-P remains above zero at 15. Accordingly, despite today's weakness, overall real economic activity is still running a little ahead of market expectations.

Retail sales volumes are expected to fall back by 0.5 percent in November after October's much better-than-expected 1.1 percent increase.

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.