Retailers had a surprisingly poor end to 2023. Volumes sales fell a further 1.6 percent on the month, much steeper than the market consensus and their worst performance since October 2022. November's drop was at least trimmed to 0.8 percent but unadjusted annual growth slumped from minus 1.2 percent to minus 4.4 percent and purchases stood at their lowest level since February 2021, in the midst of the Covid lockdown.

Purchases of food were down 2.8 percent versus November while non-food was off 1.6 percent.

Overall sales have now declined in six of the last seven months, leaving fourth quarter volumes 0.4 percent weaker than in the July-September period. Accordingly, the sector weighed on GDP growth. Inflation is falling but with consumer confidence still very weak, prospects for the current period look poor. Recession could easily arrive by the end of March. The December report puts the German RPI at minus 42 and the RPI-P at minus 41. Both gauges show overall economic activity running well behind market expectations.

Retail sales volumes are expected to rise 1.0 percent on the month in December versus November's dismal and far lower-than-expected 2.5 percent fall.

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.